okay this is my story...I found a very pretty home...that i just fell in love with...the owner is will to do

Asked by Sylvia, Laredo, TX Tue Feb 5, 2008

owner finance for 12 months until I fix my credit. My rent will be 1025.00 per month for a home that costs 128,000 and I will pay the taxes at the end of the year. Also, I will sign the title and 3000.00 will be put as earnest money. Is this reasonable?

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Alan May, Agent, Evanston, IL
Tue Feb 5, 2008
If you have "rent", then it's a rental.

If the owner is really financing it, then there should be a purchase agreement, indicating the 12 months, and how much you'll pay monthly in "mortgage", and how much you'll pay at the end of the 12 months to "purchase" the property, and the fact that the $3,000 is downpayment and will be applied toward the purchase price.

Also... what happens if you can't repair your credit at the end of 12 months (a strong possibility... it takes a long time to clear up bad credit)... do you lose your $3,000.00?? Will they extend your mortgage payments another 6 months... 12 months.... and for how much per month?

Don't enter into this on your own... consult a real estate attorney and have them draft your agreement.... (get your own... do NOT use the same attorney that the seller is using)... it'll be the best money you've ever spent.
1 vote
Julie (Toon…, Agent, Hilton Head Island, SC
Tue Feb 5, 2008
Hi Sylvia,

I am assuming that you aren't working with an agent who can advise you but dealing directly with the owner. I am also assuming that you can't qualify for a loan at this time.

How bad is your credit? Have you talked to a lender about what you need to do to qualify for a loan? Can your credit be repaired enough in a year's time for you to qualify for a mortgage? Is the owner actually going to pass the title to you and what happens at the end of a year if you can't get a mortgage, will the owner extend the terms or do you lose everything you have invested and have to move? Does the owner have a current loan on the property and does it have a due on sale clause? Who is responsible for the repairs to the house if something breaks?

All these are questions you must find out the answers to before you proceed.

If the Seller was the bank, this deal would be the equivalent of at 9.25% interest with just a little less than 3% down - there is much better financing available even for folks with less that perfect credit.

Hope that helps! Please free free to contact me if you want to chat about it. I may be able to refer you to someone in your area who can help you.
Web Reference:  http://www.toonpawley.com
0 votes
Sylvia, Home Buyer, Laredo, TX
Tue Feb 5, 2008
okay, so what do you think would be a more reasonable agreement?
0 votes
Alan May, Agent, Evanston, IL
Tue Feb 5, 2008
sounds like a rental agreement with $3,000.00 security deposit, and $1,025.00 rent per month... and you get to pay their taxes.
0 votes
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