Owner Financing happens when the owner of the property is giving a mortgage to the buyer. Owner, who is also the seller, carries the mortgage instead of a bank.

Example:

For example Brad is selling one of his houses and decides to offer seller financing (owner financing). Britney is looking for a home, but her credit is shot. So, the only way for her to buy a house is with owner financing. As usual with seller financing Brad does not have strict qualification requirements. So, as long as Britney is employed and has a downpayment Brad will disregard Britney's previous credit history. In fact, Brad decides not to even pull Britney's credit report. If Britney stops making payments Brad can potentially foreclose on the house and keep the downpayment. If on the other hand Britney keeps up with all the payments Brad will give her the satisfaction of mortgage when she pays it off. So, over a couple of beers (imagine having this at the bank) Brad and Britney negotiate the terms:

• the price ($100,000)
• the downpayment ($5,000)
• the interest rate (6%)
• the loan term (20 years)
• Check out our Owner Finance Mortgage Calculators

Britney brags about her cool arrangement to her friend, who highly recommends a home inspection.

Owner Financing Definitions

• Owner = Seller
• Seller financing = Owner financing
• Loan = Mortgage
• Balloon mortgage = Mortgage that will have to be refinanced or paid of after a couple of years. The date is agreed upon between the seller and buyer prior to closing.