Owner Financing -
Homes , Real Estate, & Land in Orange County, CA,
Please
read the Owner Financing FAQ below before
contacting me or before considering owner financing!
Owner or
Seller Financing is a real estate term in which the
owner or seller of the home finances all, or a portion
of the sale. In the real estate world, this is also
known as "Owner Will Carry",
"Owner May Carry", "Creative
Financing" , "Seller Carry back", or
similar. The seller will act as a bank and carry a
private loan on the property. Occasionally, a seller
may offer a property with zero down, but in most
cases, the buyer will be required to put up a down
payment of 10%, 20%, or more. The seller will usually
change a competitive interest rate and also has the
power to foreclose on the property if the buyer fails
to make timely payments. Owner financing is an
option for first time home buyers, investors, and move up
buyers.
There are many variations of owner assisted finance.
If the seller owns the property free and clear, he can offer
the buyer a first loan, using terms and an
interest rate of the owner's choosing. Typically, this will
include a private trust deed. It may be a fully amortized
loan, or an interest-only loan with balloon payment.
Another type of creative financing is a second
loan. This is where the seller carries a second
mortgage in order to help finance part of the purchase. A
buyer who can qualify for only part of the purchase may be
assisted by a seller who is willing to carry 10% or 20% of the
purchase cost, using a private, second mortgage.
Yet another option is an assumable loan.
If an existing mortgage has an assumption clause, the buyer
may be able to take over the payments on this loan. Under this
arrangement the buyer will still pay the seller a 10% to 20%
down payment. Loan assumption usually requires approval from
the underlying lender.
There are several other forms of seller financing,
such as a land contract, wrap around mortgage, or AITD (All
Inclusive Deed of Trust), but in today's more restrictive
lending environment, these types of financing arrangements are
risky and very difficult to accomplish.
Search for
homes in Orange County, CA with Seller Financing
Use the
search links below to find homes, real estate, and
properties for sale in Orange County, CA, with owner
or seller financing, carry back, assumable loans,
creative finance options, or loan assistance. There
are also links for Orange County lots, acreage, and
raw land. Specific terms vary, so please contact me for specific
terms on each home. If you are interested in an area
not included below, call me.
* Includes
properties with seller financing in Dove Canyon, Robinson
Ranch, Rancho Cielo, Las Flores, and Wagon Wheel Canyon
Advantages
of seller financing to a buyer
There are several advantages to
you, the buyer, of purchasing a home that has seller
assisted funding.
Easier to qualify - You
will not have to qualify for a loan at a traditional
financial institution
Lower closing costs - You
will not have to pay points or certain closing costs,
possibly saving you several thousand dollars
Better interest rate -
The interest rate on the owner financing may be lower
than what is currently offered by standard lenders
Seller financing is especially
advantageous to first time home buyers, or to buyers
who are having a difficult time getting a conventional
loan. It may be the home buying answer for people with
short job history, the self-employed, low
cash reserves, or other issues. Seller financing may
also be a great option for real estate investors, as
the financing terms may be better than terms offered
by banks and mortgage lenders.
Additional
tips for a successful seller financing transaction
Approach seller financing
with realistic expectations. You may not be able to reach
financial agreement on your first choice of homes, so be
prepared to negotiate on several homes until you find one with
suitable terms.
Pay careful attention to the
financing terms. First and foremost is the sales price. A
seller may wish to ask market value for the home in exchange
for seller financing, but make sure you are not buying a home
that is grossly over-priced. Have your Realtor run comparables
("comps") for the home to ensure that you are paying
a fair price. Second, go over the financing details with your
Realtor, such as the interest rate, monthly payments, and
financing duration. While a conventional, fixed rate loan is
typically amortized over 30 years, a seller may only wish to
finance a loan for 5 or 10 years. There may also be a
requirement for you to re-finance the loan and pay off the
seller at some designated period of time. Study the details
carefully!
You may be required to
pre-qualify. A home owner offering seller financing may
ask that you pre-qualify or get pre-approved with a
conventional lender. This is to ensure that you are qualified
to make the monthly payments, even though the payments will be
to the seller. There may be a small fee for this service to
the lender.
Be
prepared to pay a standard down payment. Don't
count on a seller offering 100% financing! Most creative
financing options still require the buyer to pay a
down payment of 5%, 10%, 20%, or more. There may
also be additional costs such as an escrow fee, home
inspection fee, or other fees.
Be sure you can
afford the home. Seller financing is not an excuse
to live beyond your means. Even though the seller is
carrying all or part of the loan, you need to be sure
you can afford the monthly payments as well as the
other costs involved with home ownership. These
include property taxes, insurance, HOA dues, Mello
Roos, or other costs that may apply. A Certified
Mortgage Planner can assist you in getting
pre-qualified for the purchase, and can also help you
understand how much house you can comfortably afford
(call me and I'll be happy to refer you to a Certified
Mortgage Planner).
You can be turned down.
"Owner financing" may be listed as an option on a
property, but it is not guaranteed. The home owner may legally
refuse to sell the home or agree to owner financing if you
have very poor credit, a bankruptcy, too much debt, no down
payment, too little
income, etc.
Don't try to go it alone!
You will need professional assistance to
negotiate and complete a seller financing transaction. Get a
qualified Realtor (like myself) to assist you. Your
transaction will be processed through a licensed escrow and
title company. Most importantly, I will ensure that your
seller financed real estate transaction is safe and legal! If
you are interested in a seller financed property, call me
today, at 949-290-3263!
Owner
Financing FAQ
Many
hopeful buyers who do not qualify for a loan or
who have very poor credit often look to owner-financing as
some kind of "magic" solution to get into a
home. Since putting this web page together, I have received
dozens of calls from people hoping to own a home using this
method and unfortunately, the reality is that in most cases,
it is NOT a solution for them. Worse, many agents who
advertise their listings as having seller-financing are doing
so even though there are huge loans on the property or the
property is in foreclosure! I'm not sure what the thinking is
in these cases, but I feel it is highly unethical to try to
lure hopeful and naive buyers into a property that is in
distress or where the loan payoff is astronomical. With that,
I feel it is imperative that I set people straight and tell
them the truth, even though it may not be what they want to
hear. There are very legitimate seller-financing situations
out there, but they are rare, and they are only suitable for a
only small number of buyers. For many other buyers, especially
those with poor credit, seller financing is not a realistic
option. My Frequently Asked Questions below may answer many of
your questions:
I
found a home I like on your web site. What
are the financing terms?
This is obviously
the most frequently asked question. I never know the terms for
a particular home because terms for owner financing or for
lease-options are never published in the MLS. This is because
there are no provisions for the fields in the MLS, plus these
types of transactions are done very infrequently. As a result,
it is strictly a phone call business (i.e., I would need to
call the listing agent to find out any of the terms).
Do
I need good credit or a down payment to take advantage of
owner financing?
Yes! Unfortunately
it is a myth that seller financing is for buyers with poor
credit or no down payment. Realistically, the few sellers that
are offering buyer assistance will do so only for buyers with
adequate credit and some reasonable level of cash down payment.
What
is the main type of owner financing being offered?
This is obviously
a broad question, but most owner financing involves sellers
who are willing to carry a second. This means they are
offering to carry anywhere from 5% to 20% of the purchase
price (you would still need to acquire a new first TD). Another type is
short term assistance. An example would
be a seller who will finance the balance of the loan for
something like 5 years. They are still asking for a substantial
down payment and the loan would have to be re-financed after 5
years. There is the occasional seller who is wiling to carry a
new first trust deed. These sellers are rare, as
there are few sellers who own their home, outright. If we do
find one, they will still want a solid buyer with good credit
and a normal down payment ranging between 5% and 20%.
I have also run
into a lot of listings offering seller financing in which the
seller is in foreclosure. My belief is that the
listing agent is attempting to offer seller financing as a
means to help the seller get out of the foreclosure. In my
opinion this is very shaky, except in the case where you (the
buyer) would be wiling to bring in enough cash to pay off the
amount in the rears, plus pick up the full outstanding loan
balance (no small feat).
Finally, it is unfortunate,
but there are few if any sellers who are offering to finance
100% of the purchase. Sorry, there is just no
"free lunch" out there!
Do
you know of any homeowners who may be in distress and will let
me take over their payments?
No,
and I would definitely advise you to stay away from these
types of transactions. A distress sale of any kind is risky,
whether you are considering a lease, lease-option, or
owner-financing. As I said above, there are a number of agents
who are listing homes with owner financing where the owner is
in foreclosure. They may be trying to offer an AITD or other
creative (yet legally risky) transaction. My advice is to
avoid these like the plague!
Will
you work with an AITD (All Inslusive Trust Deed), Land
Contract, or other form of mortgage wrap-around or loan take
over?
Sorry,
no - too much of a legal liability. My brokerage and the
escrow companies I work with will also not work with these
types of transactions. If you do get involved with one of
these types of transactions, be sure you consult with an
attorney (preferably a Real Estate attorney). Most existing
mortgages are not assumable, and if a lender did
discover that someone other than the original debtor was
paying the mortgage, they could "call the loan"
(demand payment in full). This is because of the "due on
sale" clause. While some might argue that the lender is
unlikely to do that if the payments are being made, it is
nonetheless a real risk!
I will add a lot
more to this section so please check back!
Owner
Financing Recap
Owner or seller financing is
suitable for someone who:
Is
self-employed and is having trouble documenting all of
their income for conventional financing
Is
being released soon from a bankruptcy
Has
sufficient income and a reasonable down payment (10%
to 20% down)
Has
good to excellent credit
Owner or seller financing is
unsuitable for someone who:
Has
little to no down payment
Has
poor credit
Has
insufficient income to make the monthly payments
Owner financing myths
The
owner will finance 100% of the purchase - Owners
offering full or partial financing will typically ask for
a 10% or 20% down payment!
The
owner will entertain financing if you have poor credit or
if you cannot document your source of income - No, they
will not!
The
owner will allow you to take over an existing loan -
Very few existing loans are assumable!
Please contact me if you are interested
in homes, real estate, land, or properties with seller
financing, seller carry back, owner will carry,
assumable loans, or creative financing options. I will
be happy to discuss terms and send you listings of
properties in Orange County, CA, with owner financing
options. Interested in another area? Just call me and I
will send you listings of homes with seller financing in
the Orange County area of your choice! You are always
advised to consult with your accountant, financial
advisor, or attorney before entering into an
owner-financing agreement. Many of these types of
transactions are risky and may have severe financial
consequences for you if they are not executed properly
or if the terms are not fully understood.
Please
read the 
