Buy Owner Financed Homes and Keep Your Money
Buy Owner Financed Homes and Save Bundles of Cash
Buying owner financed homes, or homes seller financed is not new, however most people has no clues the various ways a seller financed deal is setup. More importantly, owner financed homes do not normally require application fees, mortgage insurance protections, or qualification using debt to income ratios.
This article is going to explore the potential cost savings of an owner financed home versus standard bank lending.
The first item you can save is an application fee. Application fees are different with different banks, and can oftentimes be hidden via other terms. This is most often a nonrefundable charge that is charged to the borrower for the benefit of reviewing your loan application. This fee can go from $100 to $500.
The second area the can be eliminated by buying a home with seller financing is my means of not paying points. Points are usually calculated as 1{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} of the loan, and the greater money you pay toward points, the lower your rate of interest. Alternatively, less points you pay, greater will your rate of interest be. Most owner carry transactions do not tell you how many points you need to pay.
The 3rd fee that does not need paid during a seller financed sale is a residential home appraisal. Fees for a home appraisal can fall in the window of $250 to $450, or even more if the property is nontypical (like a commercial or multi-unit). The main reason you would pay this fee in an owner financed transaction is if you want one for the peace of mind. Oftentimes, sellers are able to raise the sales price for being your lender. Thus, the appraisal, which is based on a “cash type” transaction may be lower than what you agree. However, nothing is ever set in stone and an appraisal is not the end of the world.
The final savings topic for this post is the payment of PMI. PMI is a type of insurance that the borrower is required to pay on “low down” loans. As the housing collapse continues, these costs are getting higher for potential home buyers, and must be included when calculating what your monthly house payment can afford.
In summary, owner carry is an awesome method to not only have a better than the banks interest rate, it can also substantially reduce the amount of money you need up-front to purchase the home.
