Selling By Way Of "Owner Financing", What Should I Look Out For?
Hello, Let me just say thanks up front to all who respond. I just finished Rehabbing a single family home. I found a buyer, but he wants to owner finance. He tells us that his credit score is about a 540. Should his credit score weigh heavely on my decision to Owner finance him? Also he has 5% to put down on the house and we were going to charge him 2% over prime rate for a 25 year loan. What do you think? Are we approaching this the right way? What to look out for? Thanks.....
I would try and get him financed through a lender. I know 580 can get you 100% financing. I know a 506 will get you 80%. Perhaps he can get 90-95% financing with his credit score. I'd call a few lenders FOR him, tell them the scenario and ask them if it'd work. Or perhaps just ask him why he wants owner financing and not getting a loan.
Quote:
On 2004-11-30 18:07, dupont wrote:
Hello, Let me just say thanks up front to all who respond. I just finished Rehabbing a single family home. I found a buyer, but he wants to owner finance. He tells us that his credit score is about a 540. Should his credit score weigh heavely on my decision to Owner finance him? Also he has 5% to put down on the house and we were going to charge him 2% over prime rate for a 25 year loan. What do you think? Are we approaching this the right way? What to look out for? Thanks.....
you might be able to do seller financing and take out a note...
then turn around and sell the note for 70-80% face value...
its an idea that could be done for fast cash...
~Andrew
Dupont:
Why dont you put a banner on your house and find a buyer who can qualify and get a no money down 80/20 loan.
"Own This House. $500.00 Down. Call 1-800 ----------
I would not chance it with carrying paper. Maybe a lease option with some upfront option money...
Best Riches,
Jeff Adam
[addsig]
What is the price on this home? If it's under 100k i'd ask for 10% down.
Picture this:
Tenants are dirtballs. They tear up your carpet, punch a couple holes in the walls, and maybe break your toilet. How much would it cost you to do all this, including your time? Cost would be $2,000 but then a few days of your time and a mtg payment for a month could easily equal nearly $5,000. If they end up doing this damage, you at least want to come out ahead with their down payment. At least raise the price a little if selling owner financed.
Quote:
On 2004-11-30 18:07, dupont wrote:
Hello, Let me just say thanks up front to all who respond. I just finished Rehabbing a single family home. I found a buyer, but he wants to owner finance. He tells us that his credit score is about a 540. Should his credit score weigh heavely on my decision to Owner finance him? Also he has 5% to put down on the house and we were going to charge him 2% over prime rate for a 25 year loan. What do you think? Are we approaching this the right way? What to look out for? Thanks.....
If he really wants to owner finance, why not just do a simultaneous closing and sell the note at the time it is created. Your buyer gets the "owner financing" and you get your cash.
The price of the house is $69,500. Now wouldnt it be a great investment to carry the note, and have the buyer make interest payments to me for the next 25 years? We gave the buyer 2.5% over prime with 5% down because thats all he could come up with. Also that 2.5% over prime is at 1.75% over what our interest rate is for a 20 year loan. So what do you think?
Personally I don't think the rate you are offering is high enough for a sub-prime loan like this one. What are you going to do if their credit continues to be bad and they can't move. Interest rates climb to 10% and they are there under 8%.
I personally wouldn't go below 9.75% and if the buyer can't afford those payments then I would go the L/O route to take his payment making ability on a test drive. If he isn't willing to do that something isn't right.
The rate is 2.5% over prime variable. Sorry for the discrepency.