Grant Trevithick Pro Tip - Steps to buying an Owner Financed Home

Grant Trevithick Carrollton Real Estate Investor here with another pro tip. If you are looking to live in the Dallas, Tarrant, Collin, Denton, or Grayson counties you might want to consider looking for a home that is being sold using creative financing, we call it owner financing .You may be surprised at what a good fit it could be.

Wouldn’t it be great if buying a home were as simple as it is in a game of Monopoly? All you’d have to do is find a desirable neighborhood, hand the bank a few bucks, and you’d receive a house. Of course, the home-buying process is a bit more complicated in real life (especially for first-time home buyers), but it’s not impossible. To point you in the right direction, we’ve prepared a road map of the home-buying process using an alternative to the traditional home buying process. Owner (creative) Financing . From choosing the right professionals to signing that final contract, here are the typical steps you need to be aware of.

Step 1. Owner Finance Company

The first step in the home-buying process with owner financing is to find a company you feel comfortable working with on what will likely be the largest financial decision of your life. The biggest difference in using owner financing is that you can only purchase properties the company has in it's inventory. Because of this it's important to work with a company that can verify that the properties you are shown will be theirs' and not someone else.

Step 2: Find a lender

Once you’ve chosen a Owner Finance company to work with you have also chosen your lender as that company will be holding and servicing the note on your property. Make sure you trust your advocate, ask him or her to present you with information that shows the company has both the track record and internal structure to manage this important process with you.

Someone who has experience working with mortgage brokers and title companies is also important, knowing the in and outs of the entire process will help even the road bumps be, well, less bumpy. Choosing someone to handle the financial part of the home-buying process can feel like a scary step, make sure to choose a company where the staff is communicative, and available.

Step 3: Clean up your credit

Now that you have a great lender, you can ask for guidance on any credit score issues you may be facing. Whether it’s a small or large problem, the lender can provide guidance to help repair your situation and make sure you’ll be approved for a loan.

Step 4: Work on finding the home

Once you know what your purchasing power is, talk with your contact about your ideal home. Come up with a few “musts,” as well as “wants” you’d ultimately be willing to compromise on. Think bigger than just the color of the kitchen or the floor plan.

Work with an Owner Finance agent to schedule a time to do a walk through. Finding things that may need to be done to house.

For instance, do you want to be within walking distance of restaurants? Do you want space between you and your neighbors? Or is proximity to a good school the most important factor?

Step 5: Make an offer

Your real estate agent will walk you through the steps required to make an offer on a home in your area.

“Your offer will likely include earnest money that will apply toward your down payment on the home and may include contingencies such as hiring a home inspector,”. Expect some negotiation, and discuss a competitive offer with your agent.

Although homes involving owner financing typically do not involve the same level of offers and counteroffers as a traditional sale there can often be a middle ground that fits for all involved.

Step 6: Get final mortgage approval

Once your offer to purchase is accepted, you’ll work with the company to get final approval for your home purchase by the date specified for the closing. The lender may require you to pay property taxes or homeowners insurance for the first year at the time of closing, so make sure you know what funds will be expected.

Step 7: Do your due diligence

The due diligence process usually includes getting a home inspection to make sure you haven’t missed any hidden problems on your walk-throughs. Although this is usually done at your cost it can help to attend to any concerns you may have. If issues are found, negotiate for the current owner to fix them or take the cost of repair off the closing costs.

Step 8: Attend the closing

Once all of the above steps are completed, you’ll be on your way to the closing table. This is when the deed to the home is transferred from the seller to the buyer. Every transaction varies, but plan to sign a ton of paperwork. An attorney or settlement agent will guide you through the process. Then you’ll officially be a homeowner and receive the keys to your new home. Congrats!