What terms can i expect on my Owner Financed home purchase?… On most of the homes you will see here at GreaterAustinHomes.com, we do not represent the Seller therefore we do not have direct access to the exact terms they are looking for to provide Owner Financing. We will represent you as the Buyer in the transaction for FREE. Our job will be to look out for your best interest (not the sellers) and our Certified Negotiation Experts® will negotiate strongly on your behalf to ensure you receive the best deal possible. Our Buyers’ Agents are experienced in and specialize in Owner Finance transactions and are retained by Home Buyers such as yourself and paid by the Sellers of the property you purchase. (See what Austin area Home Buyers are saying about Forte Properties!)
We’ve helped families own a home even when they are:
- self employed
- on fixed income
- filed a recent bankruptcy
- in active or have had a past foreclosure(s)
- or recently started a new job with little income history
Down Payment
Typically, Austin MLS Owner Financed homes require a minimum of 10% down. Some homes require less, but we never see less than around 8% down because there are closing costs and commissions that the seller must pay out of their proceeds. It is important to know that 100% of the cash portion of sales price stated on the contract (your down payment) is applied to the purchase price of the home. Most investor and/or for sale by owner homes for sale with Owner Financing will require 5% down, but the low down payment comes with a trade-off for a much higher interest rate and not all of them are listed on the Austin MLS. You also risk paying an “Owner Finance Fee” which is not applied to the purchase price of the home.
Monthly Payment
The monthly payment will depend on the down payment amount and interest rate that we can negotiate with the sellers. The reason it depends on the down payment, is because that will determine the actual amount you are financing. The more you can put down, the less your payment will be. Typically, we can negotiate interest rates around 5 percent to 7 percent. Sometimes lower… Hardly ever higher.
The monthly payment will also include 1/12 of your annual property taxes, HOA dues (if applicable), monthly insurance payment and $25 loan servicing fee if loan servicing is used. A good rule of thumb is if you can afford 1% of the sales price of the home you are looking to purchase as the monthly payment, you will be good to go! Also, your monthly mortgage payment should not exceed 33% of your gross monthly income. After all, you want to own the home… Not have the home own you.
Length of Term
The length of time the sellers are willing to carry the financing varies from home to home and depends on what we are able to negotiate for you. If you need 2 to 3 years to obtain bank financing, we will do our absolute best to ensure you receive 2 to 3 years or even longer to be on the safe side. Typically sellers are willing to hold financing for 3 to 5 years at which that time the loan will balloon and the balance will be due in full. You can do this by paying it off with cash, or you can refinance the home by obtaining a home loan approval through a mortgage lender.
If you are unsure how long you need until you can get a home loan approval, or you are unsure if you currently are able to… You can fill out our FREE Austin home loan pre-qualification form!