How Does Owner Financing Work?

Video Transcript

"Hello, my name is Penny Smith, and I'm a North Carolina real estate broker. I'd like to talk to you today about how owner financing a house works. Owner financing is where the owner will actually put forth a certain percentage of his money and take a second to your mortgage loan. When the owner takes a second to your mortgage loan, there needs to be amortization tables factored in and different things that are required. I highly recommend that you hire an attorney to factor that and to draw those contracts up for you. When an owner does do financing, he will earn interest, so that will be a negotiating point that you will have to make and have to use. I highly recommend that you use a real estate agent for these complicated type of contracts, and also be very upfront and forthright with your mortgage lender to let them know what you're doing and how you are trying to accomplish it. A lot of people do owner financing for two reasons. They don't want to pay capital gains -- the owner doesn't -- on the money that they're receiving, so they're going to take a little bit of money over the course of a period of time. The other benefit for a buyer to have owner financing is that the buyer does not normally have to come up with down payment money, especially in today's economy where the mortgage industry has changed and you are having to come up with more money down in order to buy a house. So it gives them the flexibility to have another avenue so that they don't have to come up with 20 percent down to buy a house. The owner can actually do some of that financing. That is a recap for how to buy a house through owner finance...with owner financing involved. I highly recommend that you use a very experienced, competent real estate agent and also hire a very good real estate attorney to write these contracts in your best interest. Thank you, and I hope you have a wonderful day."