what is owner financing?

Asked by Debby, Fayetteville, NC Mon Apr 16, 2012

we were looking at a home for rent. the owner said we should rent to own it from him and he mentioned something to my husband about it being owner financed. I am not sure what all that means. I thought owner financing and rent to own were two different concepts.

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Lisa Geddie, Agent, Eastover, SC
Mon Apr 16, 2012
The seller is basically the bank and the buyer and seller will agree upon sales price, interest rate and terms of mortgage such as pay back period. This is sometimes beneficial for the seller because he/she can make more money from the interest paid on the loan.
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Michael Lowe, Agent, Fayetteville, NC
Mon Apr 16, 2012
Owner financing is different than a lease to own or a rent to own.  Owner financing is where the seller transfers ownership of a property to the buyer and agrees to lend them the money to buy the home for a period until the buyer can get their own financing through a traditional lender. If the seller out right owns the home with no existing mortgage then the seller and buyer can agree to terms of the new mortgage. In other words the seller is the "bank".
Rent to own or lease to own, there is no initial transfere of ownership. The seller and buyer agree to a predetermined price with the option to buy at a future date. Rent for this kind of lease can be higher, however some of that Money can be used towards the purchase if agreed upon.
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Pat & Steve…, Agent, Westlake, OH
Mon Apr 16, 2012
There are several types of owner financing. You really need to talk to an Attorney who handles residential real estate matters. This is an important investment for you and your spouse. You need to seek advice before you sign anything.
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Pat Heath, Agent, Fayetteville, NC
Mon Apr 16, 2012
Owner financing is when the seller of the home finances the purchase. This means that rather than going to a bank to get a traditional mortgage, you instead work out payment terms directly with the homeowner.
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Tim Moore, Agent, Kitty Hawk, NC
Mon Apr 16, 2012
Rent to own is almost always better for the landlord than the renters. The landlord will determine an amount for rent, let's say $1000. Then he adds an option fee per month, let's say $100 and this option money he puts towards your closing costs in a year when you agree to buy the house for let's say $200,000. He will also ask for another fee to hold as a deposit, let's say $300, for when you buy the house. If, in a year, you do not buy the house then he keeps the option fee and deposit which would be $1500. Since he is offering owner financing to buy it he will act as the bank in a year when you agree to buy it at the price you decided on today ($200,000) and he will use the $1500 as the down payment. He will want 10-20% as a down payment ($2-4k) and you will make monthly payments at an interest rate he picks, let's say 8% when todays rates are under 5%, to him as plays like the bank and if you can't pay he takes the house back and does the same thing to the next people he sucks in to his scheme.

My suggestion is for you to rent, and buy when you can and don't get sucked into the rent to buy train wreck.
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Fred Glick, Agent, Mountain View, CA
Mon Apr 16, 2012
Yes they are. Sounds like you need a real estate professional to handle things for you so that someone does not take you for a loop!

You can hire a licensed real estate agent to deal with a transaction. It can be for sale or rental.

Good luck!

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