When you can not be approved for a traditional mortgage, use seller financing may be a way to buy a house. With seller financing, you will buy a house you own and finance a portion of the sale. If the seller comes to you with a supply of funding, you should not accept blindly just because it means that you will become owner. It is important to review the terms before agreeing to anything.
1. Notes the interest rate offered by the owner. Determines if it is in line with other interest rates in the market. If you’ve been shopping for a mortgage with a traditional lender, you must have an idea of what the current interest rates are. If you can not get a traditional mortgage, the interest rate in dealing with owner financing is probably higher than the market due to increased risk you represent.
2. Evaluate the structure of the loan. For example, the loan may have a fixed term of 30 years and may have a balloon payment that must be met in 10 years. Not all situations with owners financing are designed to give you a long term solution. They could even just provide you with a short term solution to help you buy the house and build a credit history and then refinance the property.
3. Determines what type of interest rate is the loan. Some loans have a fixed interest rate on the loan, while others have an adjustable rate that is linked to a floating rate. Some loans will give you a fixed interest rate during the first years and then becomes adjustable.
4. Ask what happens if you are late with a payment. The owner financing agreement usually specific information about what happens if you can not meet a payment or if you make a late payment. If anything should happen in terms of your ability to make payments, you should know exactly what to expect.
5. Determines which requires both the seller in the form of advancement. Regularly, you must have a payment of cash in the form of advance before the owner finance the property. Make sure you can meet the seller advancement requires.