The first thing one ask when they hear someone wants to owner finance is "why" when the rates are so low and down payment requirements are between 3-20% depending on the loan. In order to perform a successful owner finance agreement, one must think â€œWIN WINâ€. Many people do not own their home â€œFree and clearâ€ which usually is the first problem with getting an acceptance. If the home is vacant, then one must think how to present an offer that is better than a typical renter agreement. Try saving enough money to place as a down payment, a payment term that includes interest, and a term that includes a balloon payment. Sellers do not want to carry the note for 20 or 30 years. An example would be for a $100,000 property, $6,000 down payment, payments figured over 20 years at 5% interest with a 10 year balloon payment. Remember that not every seller is in a situation that can afford to do â€œowner financeâ€. Look for vacant homes that have been on the market a long time (over a year) and ask the tough questions to determine if owner finance is a â€œwinâ€ for the seller as much as it is for you. Explain the benefit to the seller like the total interest paid during the 10 years (example above) and how the note would be paid off in 10 years once you are able to obtain a loan traditionally. Be prepared, if you cannot obtain a loan you are now running the risk as all monies paid to the seller will be forfeited if you cannot obtain the loan by the balloon payment (another benefit to the seller). If they home is an estate then you do not need to waste your time as there are many people in play and they all have their own opinions about financing. Simply put, find another home and another seller. If you need professional help, feel free in contacting a REALTOR!
PS. If the seller has the home currently on the market and a good tenant, then it is an uphill battle as they have the â€œwin winâ€ situation.
Many people are in teh same boat you are in. I just helped a client obtain a loan after her bankruptcy two years age. She was able to get approved for an FHA loan. My understanding is that an FHA lender will look at your last two years of credit history even if you have had a bankruptcy in your past. I believe Rural Development loans look at the past three years.
First go to your lender or your local USDA Rural Development office, they will help you understand what you need to do to obtain a loan. Show your Seller your good payment history, let him know you have spoken with a lender about what it will take to get a loan, show him your plan to get there. That may impress him enough to go ahead with the deal. Add a little more money to the down payment, money talks!
If not, ask to rent the house with "First Option" to buy if another buyer may come along. Perhaps he will allow the rent money ,or portion of it, to be taken off the original house price. Get it in writing (speak to an attorney) Continue with your plan to obtain a loan so you can buy the house, or another one, when your ready.
Lastly, if you have a written contract take it to an attorney to see if it can be enforced, although it may be costly.
Let me know if you need more help or advice, and remember that you are not alone, many people are in the same situation right now.