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Does Owner Financing Affect Credit?

Owner Financing is Often the Best Option When Buying a New Home, Land Plot or Business Property…But How Does that Affect Your Overall Credit and Credit Score?

Sunwest Escrow, LC of Albuquerque, New Mexico is an Expert Facilitator of Secure and Safe Seller Financed Agreements. Their service of negotiating contracts, managing critical documents, and recording historical payment transactions are imperative when securing an owner-financed loan. But this is only part of the overall story associated with owner financing. So how does ‘credit’ play a part in that story?

Let’s start with the basics – What is Owner Financing?

Buying a new home, land plot, or business property is a huge investment. Given the large cost associated with the purchase, this transaction is almost always financed in some way or another. Owner financing also referred to as ‘seller financing’, happens when a home buyer is financed directly through the seller instead of a conventional bank or mortgage lender. The seller extends a line of credit to the buyer which covers the purchase of the home or property, less any down payment made by the buyer. The buyer then makes regular payments to the seller until the amount is paid in full.

If I have an owner-financed mortgage or loan, how does it affect my credit?

If you have found a home that you love, owner financing might be the answer for you. Owner-financed mortgages, however, might not end up on your credit report. Why is this?

With few exceptions, banks and traditional mortgage lenders report home and property loans as a standard monthly practice. The credit bureaus require that lenders meet certain financial standards before they can report a loan. Reporting lenders generally have to be a business, meet certain compliance measures or provide proof of the mortgage. If your lender isn’t a business, the mortgage might not be able to be reported.

That being said, if your ‘Owner-Financed Lender’ meets the credit bureaus’ minimum standards for reporting, you could be able to have your mortgage reported. Ask your lender if they are willing to fill out the paperwork necessary to report the mortgage.

Defaulting on your owner-financed mortgage can affect your credit…

Although your owner-financed mortgage or loan might not be reported to the credit bureaus, if you default on your loan it can still have a negative impact on your overall credit. By not paying your mortgage, your lender has the right to pursue your debt through legal channels and can garner a judgement against you, which does end up on your credit report. They can also turn their claim over to a collection agency and these companies are notorious for reporting to the credit bureaus.

So as you can see, even if your mortgage is not registered with the credit bureaus, defaulting on your owner-financed loan can still have serious repercussions.

The team at Sunwest Escrow, LC are experts at facilitating and implementing all of the necessary legal safeguards and contractual arrangements associated with an owner-financed loan or mortgage. Whether you are the buyer or the seller, as a third-party escrow company we work to secure owner-financed mortgages that are in the best interest of both parties involved.

Contact Sunwest Escrow, LC Today at 505-237-2225 or Email Us.


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