Seller financing, or, what is commonly called rent to own homes is a way that lets a buyer make payments to the seller in an attempt to build up enough of a down payment and prove financial stability, that they may then buy the home, either from the owner on a payment schedual or by then taking out a mortgage loan to pay for the property. Full or long term owner loans are hard to find because the sellers would rather receive full payout instead of taking their equity over time. As you prepare to sign an agreement, have a lawyer look over the paperwork and verify you know your money is being used properly. Make sure you know of any leans or loans on the house because if the owner still needs to make loan payments you may lose everything if they default.

In standard financing, the purchaser may not qualify for a mortgage. With lease to own homes it’s easier, in most cases to qualify, than it is for a standard loan if you’ve been moving between jobs.

Not having to qualify for a loan is one of the best advantages for owner financed homes. This may be the only option for those who can’t qualify for a standard bank loan. Because you are working with a person rather than a traditional company, you have a better chance of decreasing monthly payments. For the seller, this type of financing allows them the ability of setting the terms due to the attractiveness of the purchaser avoiding a traditional loan. Interest rates are either profit for the owner, if the purchaser backs out, or a down payment if they follow through.

The major risk is whether or not the buyer can make the monthly payments. This is only a little issue if the seller has spent time drawing up detailed paperwork with the professional approval of a lawyer or real estate broker. If the purchaser defaults then the owner can foreclose on the house, taking it back as payment. The bottom line however for the purchaser is that often costs are higher on seller financed properties than on traditionally financed houses.