If you’re thinking about buying a house from a seller using seller financing (also called “owner financing”) make sure you’re aware of the advantages and the drawbacks! Keep reading this blog post to learn the 5 disadvantages of buying a home via owner financing in Roanoke so you can be prepared
When a seller wants to sell their home in the Roanoke area, they could wait for buyers to come up with bank financing, but there’s another option as well: they can offer owner financing (also called “seller financing”) in which the seller acts as the bank. The buyer simply pays monthly payments to the seller until the house is paid off.
For many people, owner financing is an excellent alternative because it allows buyers to get into a home that they might not have the credit to purchase, plus it gives the seller a steady cash flow if they don’t want or need the large amount of money from the sale of the house all at one time.
But is owner financing right for everyone? It may not be.
5 Disadvantages Of Buying A Home Via Owner Financing In Roanoke
#1. Harder to get
Bank financing is the most common way for buyers to buy, and the way most homes are sold. However, most home owners might not be aware of owner financing as an option to sell a house. So owner financing is harder to get in a market where sellers are not aware that this option is available.
#2. Fewer options
Because it can be harder to find an owner willing to do owner financing, that might mean you have fewer potential houses to choose from when buying, or it might mean that you have to look at more houses before you find one that the owner is willing to sell through owner financing. Owners who do not own the property “Free and Clear” with no mortgage will most likely not be able to sell using owner financing.
Owner financing comes with many more flexible terms than you might normally get at a bank. However, this can also be a disadvantage because if you are not familiar with the all the possibilities you may overlook a term or you may create a term that does not give you an advantage.
#4. You may pay more
With traditional bank financing, the interest rate is set by the bank. Owner financing may have higher interest rates (depending on the other terms of the contract) and you might end up paying more for the house. However, you might be fine paying more overall if it means you can get into a house that you couldn’t otherwise buy with bank financing.
With bank financing, you work with a bank and they are professionals who have a code of conduct and industry regulations to follow. But with owner financing, it’s just an agreement between you and the owner so make sure you are comfortable with the owner first before making an agreement with them.