One huge step when it comes to buying an Encinitas home is financing it. This is usually the most dreaded, least-exciting step of the process and for good reason. Just like your Encinitas home, your mortgage is going to stay with you for decades to come and it doesn’t care if you lose your job or have high medical bills.Unless you want to risk a foreclosure, you need to take this step very carefully. One option to consider is owner financing.
The Main Reason to Consider
Since the financial crisis, the U.S. government became more restrictive about lending requirements in an attempt to make sure only the most qualified could own Encinitas real estate and, thus, help ensure so many bankruptcies and foreclosures wouldn’t happen again. The problem is that they may have gone too far in that now many very qualified applicants are finding they can’t get a loan.
That’s no random assertion either. According to the National Association of REALTORS, these new requirements may have stopped as many as 15% of potential home buyers from following through on their purchases.
What Does Owner Financing Entail?
As the name suggests, home financing basically means that the owner of the home handles the majority of the financing themselves and, thus, holds the buyer’s note—or at least most of it.
Essentially, the owner takes the place of the bank and provides the buyer with a kind of mortgage. All it takes to do this is a specific legal document that will bind the two parties together. It’s no different than other contracts in this regard.
The main benefit to the owner is that they can sell their Encinitas property during a bad market. These restrictions don’t just hold back buyers, obviously, they’re also hurting people who want to sell homes. By going with an option that isn’t controlled by such regulations, sellers can finally move on from homes they don’t want.
This also means buyers can get homes when they may have otherwise been restricted from doing so. Terms tend to be much more favorable too. A buyer who can’t afford a sizable down payment may be considered a renter until they’ve paid enough to equal a down payment and then begin acting like a traditional mortgagee.
Of course, both parties need to consider what could go wrong. There’s a lot of money involved in this arrangement, to say the least. For one thing, the buyer could simply stop making payments. They could leave the home or even damage it before taking off.
The buyer, on the other hand, could find out that the seller doesn’t actually have ownership of clear title to the property. Their owner financing could also turn out to be tied to the owner’s adjustable rate loan, which would be it becomes more expensive over time.
There are too many benefits tired to owner financing to completely ignore this option. However, you still want to make sure you weigh out the scenario like you would with any other big decision so you don’t wind up getting burned.
~ Cherie ~