Owner financing is exactly what it sounds like; instead of seeking a loan from a bank or broker, the seller of the property will finance it for you. Owner financing is becoming a great option in this slow market, since many homeowner hopefuls have taken a hit to their credit through a job loss, foreclosure or short sale. Owner financing may also be a great option for a seller, especially if they own the home outright, or if they don’t want to pay a big chunk of taxes on the full sales price of the home. Owner financing will provide the seller a steady stream of income, like renting does, and they can often times charge a higher interest rate than a bank, since they can decide whether they want to sell to a “higher risk” individual or not. And, finally, the beauty of owner financing is that the terms are 100% negotiable, and can create a win-win situation for both the buyer and seller, if they’re done right. Here are a few ways you can go about an owner financing deal:

Lease Purchase – Also known as “Rent to Own,” a lease purchase allows for part of the down payment or part of the monthly payments (or both) to contribute to the purchase price. This is great for both buyer and seller, since the buyer doesn’t need a big chunk of money for the down payment, and the seller can observe how the tenant-buyer will pay back the loan. Most times, a seller can back out of the deal if the tenant-buyer is constantly late or behind on payments. Another reason this is a great deal for a seller, is because if the buyer defaults on their loan (misses payments) the owner can foreclose, just like a bank could. The process does require legal action and can be a bit tiring, but the ownership transfers back to the seller, and he keeps the money he collected on the home, as if he were renting it.

Lease Option – In real estate an “option” means you are giving the party a right to something without a commitment. In lease option Cherry Creek homes for sale, you are letting them lease with the option to buy at the end of the lease period. The tenant can choose to exercise this option if they choose, or can walk away. Typically, a seller will want to structure the monthly payments to include extra towards a down payment, so not exercising your right to buy could leave you with a loss at the end of your lease.

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