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Is It The Time Now To Do Owner Financing And Lease Option?

ortgage pinch causes domino effect of pain , based on the article at US Today. The problems in the mortgage industry, which began late last year and have rapidly deteriorated since June, are having a domino effect in the real estate market. Increasingly, first time home buyers are getting shut out of the market, and that hurts move-up buyers. The credit crunch is exacerbating the drop in buyer demand and potentially compressing the natural downturn we expected to be spread over six months into a few weeks.

Even worse, the problems in the mortgage industry trigged the sharp down turn in stock market. A flurry of other bad news is reinforcing worries about how difficult it has become for some borrowers to get money. Each day's developments heighten fears that problems emanating from sub-prime mortgages are spreading. The flow of scary news is pumping up fears that have been hurting stocks in recent weeks.


If you are a home seller and got to sell your house now, you need to consider help homebuyers to close the sales easier. You need do things a little bit differently from what people have been doing last few years.If you are a home seller and got to sell your house now, you need to consider help homebuyers to close the sales easier. You need do things a little bit differently from what people have been doing last few years.If you are a home seller and got to sell your house now, you need to consider help homebuyers to close the sales easier. You need do things a little bit differently from what people have been doing last few years.In my previously blog, I talked about offering effective incentives to buyers, which include cutting down the price, offering to pay closing cost or down payment, etc.If you are a home seller and got to sell your house now, you need to consider help homebuyers to close the sales easier. You need do things a little bit differently from what people have been doing last few years.In my previously I talked about offering effective incentives to buyers, which include cutting down the price, offering to pay closing cost or down payment, etc.

If you are a home seller and got to sell your house now, you need to consider help homebuyers to close the sales easier. You need do things a little bit differently from what people have been doing last few years.In my previously I talked about offering effective incentives to buyers, which include cutting down the price, offering to pay closing cost or down payment, etc.Now, you may want to consider offering owner financing and lease option so you can reach those buyers who want to buy but couldn’t get a loan or the interest rate they want. By doing so, you have more arsenals than other sellers.
For the buyers with relatively good credit score above 620 and with enough income to pay your mortgage, you may want to consider owner financing. Based on your financial situation and the amount of equity on your home, you can consider 80-10-10 or 80-15-5 program. That is 80% mortgage from an institute lender, 10% -15% second mortgage from you and 5% - 10% down payment from buyer. It is much easier for buyers to get a mortgage loan at 80% loan to value (LTV) than 95% LTV.

If you are a home seller and got to sell your house now, you need to consider help homebuyers to close the sales easier. You need do things a little bit differently from what people have been doing last few years.In my previously I talked about offering effective incentives to buyers, which include cutting down the price, offering to pay closing cost or down payment, etc.Now, you may want to consider offering owner financing and lease option so you can reach those buyers who want to buy but couldn’t get a loan or the interest rate they want. By doing so, you have more arsenals than other sellers.For the buyers with relatively good credit score above 620 and with enough income to pay your mortgage, you may want to consider owner financing. Based on your financial situation and the amount of equity on your home, you can consider 80-10-10 or 80-15-5 program. That is 80% mortgage from an institute lender, 10% -15% second mortgage from you and 5% - 10% down payment from buyer. It is much easier for buyers to get a mortgage loan at 80% loan to value (LTV) than 95% LTV.You can also do wrapround mortgage. Wraparound mortgage is a variation of a seller second mortgage wherein the seller remains obligated to pay the underlying first mortgage. Seller continues to make payments on the first mortgage loan and buyer makes payments to seller on a new mortgage loan that is subordinated to, and wraps around, the first mortgage.

When you do the owner financing, always get a good real estate attorney to get right things rigth and never try to do it by yourself. You can also read my blogs on what are the mistakes made in owner financing and how to prevent buyer default on payments at http://besthomesellingtips.com/category/home_selling_by_owner_financing/
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For the buyers with poor credit scores but enough income to afford the price of your house, you may want to consider to do lease option. In a lease option, buyer leases your house for 12 months or so and then purchases it at the pre-agreed sale price when the lease is due. Buyer has to pay the option money for that agreed sale price. The option money is non-refundable is buy walks away. But it will apply to the buyer's credit at closing if buyer purchase the house as agreed.

In the lease option approach, the advantage for the buyer is that if the buyer pays your rent on time every month, the buyer will get your help to improve his/her credit score and then ends up to buy your home at end of lease agreement.

The advantages for you as a seller are 1) you get the down payment money if buyer walks away when the lease is due; 2) transfer the responsibility of property maintenance to buyer; 3) possibly a higher price than selling it right now. This is much better approach than just renting it out.

For more information on how to do lease option and owner financing, what to do and what not to do, visit my blogs at http://besthomesellingtips.com/category/home_selling_by_owner_financing/ or
http://besthomesellingtips.com/category/home_selling for sale by owner/
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About the Author
John Wen is a licensed realtor and an active investor. He is well-trained in real estate investment. He publishes his blog regularly on http://besthomesellingtips.com. One of his blog was nominated for the top 7 article in an internet contest.