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Understanding Home Ownership - The Beginning

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  1. Module 1: Understanding Mindset
    9 Lessons
    |
    1 Quiz
  2. Module 2: Understanding What you want your money to do for you?
    6 Lessons
    |
    1 Quiz
  3. Module 3: Understanding The Types of Real Estate Investments
    7 Lessons
    |
    1 Quiz
  4. Module 4: Understanding The Resources
    11 Lessons
    |
    1 Quiz
  5. Module 5: Understanding The Finance
    15 Lessons
    |
    1 Quiz
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Owner Financing

Banks or other giant lending institutions are not the only entities that  can finance a property for you. In some cases, the owner of the  property you want to buy, can actually fund the property, and you will  simply make your monthly payment to them rather than a bank.  Typically, the only time a property owner will do this for you is if they  already own the home free-and-clear, meaning the seller cannot have  an existing mortgage on the property. If the seller does have another  loan and then sells the home to you, the seller’s loan must be paid back  immediately or face foreclosure.

This is due to a legal clause written into nearly every loan called the  “Due on Sale” clause. This clause gives the former lender the right to call the note immediately due. If that amount can’t be paid, the lender has the right to foreclose on the  property. Some investors choose to ignore this clause and still purchase “subject to” the other loan, risking  that the bank won’t foreclose. If the conditions are right, owner financing can be a great way to gain ownership of real estate without using  a bank. Owner financing can also be a good tool for selling your properties in the future as well, which we’ll  cover more in chapter 8 when we look at “exit strategies.”