Legal Considerations of Owner Financing

Owner financing is the same as seller financing. Seller financing is a business opportunity that allows people to experience a win, win situation in real estate. It helps families that have been declined mortgage bank loans to acquire their dream homes. Seller financing helps the original owner of the property sell the home and receive a monthly flow of income from the sale of the real estate. The two parties in this scenario accomplished their economic goals.

Seller financing is an alternative to purchasing a home when conventional methods no longer work for the average person. With the real estate financial market still in the red, the banks are offering less and less to customers for mortgage loans. But owner financing offers a percentage that is reasonable between the two parties. The banks are not interested in small loans in the $60k or less category. These loans are not cost effective for them. But with owner financing these small loans offer a gold mind for the private investors who sees the potential in such small loans. But even the seller financing market is subject to changing economic times.

The House of Representative (HR) is trying to pass HR4173. The passage of this bill could change the way seller financing is conducted. The passage of the bill will not eliminate seller financing but will make people work within stricter governmental guidelines. If the bill is passed, the following could come into affect:

• The banks are not interested in the small real estate loans, but the owner financed individuals are attracted to them. Private individuals have real estate knowledge and resources which enable them to finance any size loan they are interested in. But if HR 4173 is approved, private individuals could be limited to private financing of a loan every three months. Private financing could be seriously hampered with passage of HR 4173.

• In the new mortgage market the mortgage loan closing fees will jump considerably. The individual must be prepared to pay between $7,000 to $10,000 in closing costs. Owner financing does not charge a host of out of pocket fees from the individual. The few fees that are charged are included in the offer transaction. They are not charged as out of pocket fees from the individuals.

The tight mortgage market is making it nearly impossible for people to qualify for conventional mortgage loans. The seller finance market is becoming more and more appealing to individuals desiring to own their own home but can not through traditional financial institutions.

The NAR lobbyied on behalf of owner finance. They were able to show the House and Senate that the owner finance community did not qualify as a mortgage originator. They pointed out to the two houses that owner financing does not receive a lump sum of money for the purchase of real estate. They instead receive a stream of money over a period of time. For many people this is retirement money that will be used to make a more secure future for seniors.

Had the two houses passed the original bill they wanted to pass, seller finance individuals would have to take an intense course as a mortgage note originator. The time and expense of such a requirement would have created an un-needed financial burden on those individuals. In stead of the requirement to take intense courses, the seller financiers are limited to three property sells per year where they finance the sell of the property.

Amazon.con has books on seller financing that will help guide you through the process. Check out the list of books to your right. Or go to Amazon.con for more information on seller financing.