How to Owner Finance a Home & Make a Profit
Owner financing works to the advantage of the owner of a home that is paid for entirely, or an owner who does not need the proceeds from the sale of a house to buy another primary dwelling. The real estate buyer who looks for an owner to finance a home is typically one who cannot get a home loan from a bank or mortgage lender due to credit status. Such buyers are usually willing to accept the pricing and interest terms of owners who will finance a home purchase. The seller can also sell the loan.
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Instructions
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Price the house well above the current market comparisons for nearby recent home sales. Homes that sell during a market lull are often sold below market value to avoid foreclosure. An owner who can afford to finance a home sale is able to name the price and avoid losing profit in a buyer's market.
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Set the interest rate for the financing terms higher than banks and mortgage companies are charging. The interest rate will be calculated against the selling price to determine the monthly payments, or the income you receive for carrying the loan.
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Pre-qualify your buyer with a credit check from a reliable credit reporting agency or a debt-to-income ratio scale, or both. A real estate buyer who is not able to get home financing may have a questionable financial past or may simply not be able to afford a mortgage. Your buyer will have to be able and willing to make the monthly payments on time for you to make money by financing the deal.
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Sell the mortgage loan to a bank or mortgage investor. Sell the loan immediately after the closing, or after establishing a payment record over a number of months. The sale of the loan will give you a payoff for owner financing the home at the above-market price you charged.
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