If you’re thinking about buying a house and you’re exploring your financing options right now, there’s a good chance you’re deciding whether you should go through bank financing or owner financing. There’s already a lot written about bank financing, so this blog post is meant to give you the other side of the coin, to talk about why owner financing makes sense in California and the surrounding area…
You’re probably familiar with bank financing – that’s when a bank (or other lender) gives you a mortgage loan so you can buy a house. The bank pays the seller the full amount that you buy the house for, and then you pay the bank back over a period of several years until you own the house free and clear.
But it’s not the only way to buy a house, there’s also seller financing (also called “owner financing”). That’s when the sellers agrees to not to take the full purchase price for the house right away but instead takes the 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.
So you might be wondering, “Why owner financing makes sense in California?”
Here’s our answer…
There are 3 main reasons why owner financing makes sense in California:
3 Reasons Why Owner Financing Makes Sense In California
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.
Owner financing is a great tool for both sellers and buyers; if you’re thinking about buying a house in California, owner financing can give you the means to buy your next house.