by Jeff
5. August 2011
Thinking of moving into your own home but a bit short on your credit? Maybe you’re recently coming back from a bad credit hit and need a hand in getting a new home for your family? Well you might just have some luck in buying a property with seller finance. Though this option is slowly getting back into the home buying market, not a lot of people are aware of this option when it comes to home purchase. This works great with rent to buy as not only does it allow you to come up with an agreement that would fit your pocket and paying capacity but likewise allows you to improve your credit overtime until you’re ready to acquire a mortgage on your own.
To get you started, ask your home seller about Seller finance. In most cases, your seller would be aware of this option though it may not necessarily guarantee if it would apply to the property your eyeing. If applicable, your seller would loan you the property in which you would have to amend to terms and conditions, including a lock in period towards complete purchase of the property (usually 2-3 years) and weekly repayment cost. The seller has the right to charge interest on top of the regular repayment cost for security purposes. During the contract period, legal right and mortgage ownership is retained by the seller.
Often, the seller would ask for an upfront down payment or deposit in which the seller would use to pay the mortgage at the bank. A portion of this would of course be applied to the principal sum of the property. Depending on what was agreed upon, the buyer may request certain terms such as basic furnishings to the house, and basic repairs. (which would be covered by the repayments the buyer would make)
Though are certain risks towards a seller finance deal which may be kept at a minimum through a buyers prudence in repayments. Being late on rent is bad, but is at times inevitable especially in a tough financial environment. In any case, depending on the the terms of the sale, a seller may repossess the property in case the demands of the agreement are not met. Any and all rent payed upon by the buyer will no longer be returned and the seller retains ownership of the house to sell it to another buyer.
However foreboding any negative circumstances, at the end of the seller finance agreement the buyer makes a final payment to the seller which in turn transfers the legal rights and ownership to him/her. Usually a balloon payment or sum would suffice for the remainder or agreed upon principal cost of the property wherein the mortgage would already be transferred to the property buyer including all or any legal responsibility. For someone with a low credit, this would be a good start as it gives one, enough time to raise their credit until such time that a mortgage may be acquired on their own within a span of 2-3 years in a locked contract.