5 Buyers that are Looking for Owner-Financing Homes Albuquerque
“To some, the inability to qualify for a loan may raise a red flag. There are many reasons why a borrower may not qualify for conventional financing. It is noted that being unable to qualify does not necessarily equate to a bad credit risk or a ‘deadbeat’.“
-from Just Another Tool… Real Estate Contracts by CEO Terry White
These are great buyers. They are often hard-working individuals that can’t qualify for a loan because verifying their income to the banks can be a challenge. The banks usually require a minimum of 3 months of paystubs to prove you can pay back the loan from a steady income. If you are not able to provide 3 months of paystubs, they typically require 2-3 years of income tax returns to prove income. A new self-employed individual may be unable to show any income for years. Do you see where the convenience of owner-financing comes in? Cutting out the bank and all of their red tape makes it easier for these individuals to purchase a home.
Investors are always looking for quick, low-entry investments that they can fix and flip fast. Which means paying the remaining balance off as soon as the property has been remodeled, or updated, and sold. Dealing with banks slows the process and kills deals for investors. It’s better for them to work directly with the owner and close quickly.
People with Little, or No Credit
Banks place a lot of value in credit scores and don’t typically lend to people with little, or no credit. Credit scores do not take an individual’s income, cash, or assets into consideration. The use of credit, and a high credit score, is not the only measure of a person’s ability to pay back debt.
And, let’s not forget the young up-and-comers who are building their credit, but may not be up to the banks standards just yet.
People with Little, or No Down Payment
Conventional loans often ask for 10%-20% down, and are not flexible. But creating a sale using owner-financing can be creative; trading assets of like kind, multiple balloon payments, increase the interest rate, or increase the monthly payment. There are more solutions than I can include in this paragraph.
People Looking to Buy Unconventional Properties
Banks tend to protect their loans by using the property as collateral, knowing they can take it back and resale it for the amount of the outstanding loan, or more. They don’t typically lend money on land or properties that do not meet their standards, and processes. This does not mean the property does not have value. It simply means it’s more risk than the bank is willing to take. But to many people risky real estate is often highly rewarding.
Owner-financing homes is not for everyone, or every situation, but the great thing about owner-financing is that it can be flexible where conventional financing is not.