As indicated Owner will Carry (OWC) means that the owner will become the bank. Generally, a seller who owes no money on the property will sell the house to a buyer for a specific price and ask for a large down payment,somewhere around 20%-25%. Then they finance the difference at a higher interest rate, generally 8-12%. That interest can be interest only payments or principal &interest payments. Finally the "term" is set which is how long the payments will last, this can be anywhere from 3 to 30years. These terms are negotiated between the buyer and the seller. So for example, if the seller has a house that is paid off and today it's worth $100K, the buyer would put $20K down and then owe the seller $80K on payments for 30 years.
In todays market (04/05/2013), most sellers are taking 10-12% interest, on interest only payments for 5years and generally they do not charge for pre-payment. This means that for the same example a $100K hous; The buyer will pay $20K down, and make payments for 5 years. At the end of the 5years, the buyer must re-finance the balance of the loan or sell it at a profit within the 5years to pay off the loan.
What is great about owner financing is that a person, only has to qualify with the seller, so credit doesn't much matter. It is also really great for investors who want to buy multiple properties but can't get financed by a lender because they already own to many houses.
There are limited number of owners who do this so the choice of homes are less. Owner Financing can have a limited term, such as the 5year example above, so you must be sure that you are able to refinance the house or renegotiate the terms of your financing after the 5years. Generally, investors who complete OWC with a finite date do NOT renegotiate the terms, so as an individual you must work hard to get your credit straight within that time period or find another investor to take on the loan. Also many people confuse "Land Contracts", "Contract of sale" and "Lease Options" with Owner will Carry. They are NOT the same, so be sure you understand the terms or work with an agent who does.
Overall, I love OWC... I think it's a great way for people to get into homes.
In most cases, the interest rate will be slightly higher than the banks and is usually offered to buyers that for some reason can not qualify for a new loan .
in current market, and with low interest rate, if you have a good credit score (over 620 for FHA loan) and employment history of at lease two years with the same line of work, I would suggest to obtain financing through mortgage banks.
Please call me for more information or if you are interested to get qualified by a great lender
Certified International Property Specialist
Realty Executives of Nevada
David Cooper Investing in Las Vegas since 1994 702.499.7037