One of the most popular avenues for financing home purchases has become owner financing mortgages. There are many people in western Canada who have the means to afford a home but have no access to funding through traditional sources such as banks. Even though they have put away a meaningful down payment, either their credit problems in the past or the fact that they don’t have a clear, verifiable income history, because of a recent career change or their decision to own their own business, is keeping the banks from approving them. This is why owner financing mortgages have become popular, as it gives sellers the chance to make a tidy profit on the sale of their home, in the form of regular monthly payments for the principal as well as interest that is higher than what banks get for mortgages, and it gives buyers another way to own a home.
How to Owner Finance a Home
At Amansad Financial, our Private Seller Finance Blend program takes clients through every step of the process, from assisting in locating the desired property to assisting in executing the final owner financing mortgage contract. No matter where you are in western Alberta, Amansad Financial has connections with realtors, private investors and agencies that represent property that is available through the owner finance process. However, any property for sale has the potential to become a owner finance property; in many cases, the seller has not considered the possibility. If the seller owns the house free and clear, the process is relatively simple to carry out; if there is an existing mortgage on the property, things become a little more complicated, but it still possible.
How to Do Seller Financing
If you are wondering How to Do Seller Financing and are interested in purchasing a house, the first step is to get pre-qualified for a private mortgage. Amansad Financial can handle this process for you, either in person or through exchanging documents via email or fax. You are likely to need a 10 percent down payment, although 5 percent is enough in some cases (this depends on the seller). However, if you have more ready to put down, that is even better, because it means you are asking the owner to finance less, and you have more equity in the house from the beginning.
Once you have the pre-qualified, the process is quite similar to going through a bank. Find the house that you want to purchase, and then approach the seller with your offer. If you have engaged the representation services of a realtor, then that’s how you would advance your offer. However, if the home is listed as for sale by owner, you may want to consider using an attorney to draft the agreements. You want protection with your purchase, and using an attorney gives you considerably more security. Amansad Financial does handle all of the mortgage paperwork with the private lending arrangements as it relates to the seller finance, but it does not manage the administration of the rest of the sale.
Amansad Financial will require an appraisal of the property before finalizing the seller finance; this appraisal takes place at your expense, which is customary, even with a traditional lender. If a recent appraisal has already taken place on the property, we may be able to use that paperwork instead of having to pay for another report. Amansad Financial recommends that you engage a home inspector to give the property a once-over. This is not a requirement for financing, but it does give you some protection from problems in the home that you may not be qualified to see. Issues such as black mold growing in the home’s inner structure or problems with the plumbing or wiring are likely to be beyond your expertise. However, once you move in, these can be issues that are prohibitively expensive to repair. An inspection allows you to request those repairs to be made before the sale, or to ask for a reduction in purchase price to compensate for your own expense in having the repair made.
If this sounds like a process which would benefit you, give Amansad Financial a call today. Before you sign another year’s lease and throw 12 more months of rent down the drain, let us walk you through the particulars of your own situation. We have helped many clients in similar spots and look forward to working with you as well.