owner financingOnce you decide to owner finance a home there are certain steps you can take to make sure the transaction is a win-win proposal.

One of the first things to do is evaluate your buyers.

When considering an owner financed property, find out from the buyer why they can’t get traditional financing.

A strong candidate for owner financing is someone that can’t qualify due to a new job or business.

A self employed borrower today must have two years consistent business earnings verified by income tax returns before a lender will consider a loan.

If the buyer has been self employed less than two years or simply had an off year, they won’t be able to obtain a loan from their bank. Such an instance is an opportunity for you to owner finance your property.

Ask the buyer to provide you with a copy of three months’ worth of bank statements both personal and business.

Review the statements and look for regular deposits into their accounts. If the buyers say they make $10,000 per month, then see if the bank statements back up that claim.

Look for negative items on their bank statement.

Are there returned checks? Overdrafts? Low balances throughout the statement period?

If so, the buyer may have problems making payments to you. If the bank statement shows consistent, positive balances with regular deposits, you have a candidate.

Finally, review a copy of their recent credit report.

If there are a number of current late payments or collection accounts, then the buyer is having problems paying their bills.

If there are late payments and collection accounts that are more than two years old with good credit since, you can figure out that whatever put them in a bad financial position has been corrected and they’re back on track.

Finding a good candidate for an owner financed transaction, act like a traditional lender.

Listen to their story, verify their income and review their credit history. Once you’ve covered those bases, all you need to do is present your owner financing terms to the buyer.

Talk soon,
David Slabon