Are you buying a home and exploring your financing options? Most buyers assume bank financing is the only option — but that’s not exactly true. While bank lending is certainly the most common form of financing, there is another option on the table. Read on to learn more about why owner financing makes sense in Sacramento and the surrounding area.
You’re probably familiar with bank financing already, even if you’re a first-time buyer. Bank financing is when a bank or credit union gives you a mortgage loan to buy a house. The bank pays the seller, and then you pay the bank back over a period of several years (usually 15 or 30) until you own the house free and clear.
The other option is owner financing, sometimes called seller financing. For this type of transaction, the seller agrees to not to take the full purchase price for the house right away, but instead receive money over a period of years. In effect, they are acting like a bank, accepting partial payment over time until you’ve paid off what you owe.
3 Reasons Why Owner Financing Makes Sense In Sacramento
First, it can allow buyers to get into a home faster. Owner financing can sometimes be useful if a buyer does not have the credit score available to get a mortgage loan, or if they cannot afford mortgage payments that a bank might require. With seller financing, the owner may not require clean credit or high payments, allowing buyers to get into a home faster when they may not be able to do so with bank financing.
Second, it provides flexibility to both the buyer and the seller. A bank uses fairly traditional terms: You’ll pay so much money as a down payment, then the rest paid back over time – either as a fixed rate or variable rate mortgage. But a seller and a buyer may find different terms that they agree to that aren’t as rigid. In fact, some agreements can become very creative and flexible for both parties!
Third, it can be a win the seller, too. A seller wants to sell their home, so offering owner financing gives them access to more buyers who might not typically be able to buy. By offering seller financing, they increase the number of potential buyers who would even look at the house. And not all sellers necessarily require all the cash up-front (which why would get through bank financing). Instead, they may prefer the cash flow that owner financing gives them.
Summary
Owner financing is a great tool for both sellers and buyers; if you’re thinking about buying a house in Sacramento, this type of financing can give you the means to buy your next house.