Can anyone recommend some normal things to watch out for, with owner financed mortgages? E.G. Specific terms in the contract, etc. Thanks
I did my first deal with owner financing, a great benefit. I used to think owner financing was strictly available on lien-free properties, obviously this is not the case. The first question I would ask is if there are any liens on the property and if they will be paid-off prior to closing or if they will remain and the seller is simply wrapping their owner financing around and existing mortgage. Beyond this just get the terms of the financing in writing and make sure you understand every detail. Amount, rate, term, when are payments due, any balloon requirement etc.
Wrap around mortages kind of scare me. What if the original mortgage holder [the true owner, per the house title] just refuses to quit making payments…say if he has financial problems? Even if you have some sort of legal document between you & the mortgage holder, the original lienholder has the house secured in his/her/its name [their name is on the title, not yours]…and you can only sue the guy in civil or bankruptcy court. <?>
I think I will only do owner financing if the guy owns the house free & clear, and if the title is properly put in my name with him/her as the only lienholder. I’m even considering paying cash for houses and wholesaling them to other investors in D/FW with or without financing. It’s quite an exciting concept actually.