Can I Sell My Home with Owner Financing?

If you’re looking to sell your home that is either owner financed or you want to extend owner financing to help facilitate the sale, there are a lot of options available. I have a friend who owned a short term rental property in a beach town and she was trying to sell it as interest rates were spiking. She wanted reliable income but didn’t want the hassles of managing a short term rental, so she advertised her property for sale with owner financing. It was a win-win situation. The seller got their reliable income each month and the buyer got a better deal than their bank on the interest rate.

Here are some strategies selling your home using owner financing.

  • Assumable Mortgages: Some mortgages allow a buyer to come in and assume responsibility for the remaining amount on a mortgage. The caveat is that the buyer would have to qualify to assume these mortgages through the lending institution that issued the mortgage. Here are some types of assumable loans:
    • FHA: Some FHA loans are assumable. FHA loans are typically going to be issued to first time home buyers and home buyers with lower credit scores. Some of the loans are assumable allowing the new homebuyer to take over the remaining loan balance terms.
    • VA: Veteran Affairs loans are available to active duty and eligible veterans of the military. These loans are assumable so a new buyer can assume the VA loans without needing to obtain their own financing.
    • USDA: United State Department of Agriculture makes loans designed to promote rural development and homeownership in rural areas. While not all USDA loans are assumable, some may allow assumption, subject to approval by the lender.
  • Owner Note: If a homeowner owns the house free and clear, then they can finance the loan themselves as was the case with my friend above. A real estate attorney can draw up the paperwork and the buyers pay you a down payment that is negotiated upon and sends you a payment every month. If the new owner fails to pay, you can foreclose on the property as a bank would.
  • Wrap-around Mortgage: This is a more complicated transaction than what has already been discussed. This is when a homeowner, who has a mortgage on their property with a bank, sells it to another person using their owner mortgage, similar to owner financing. The property taxes, insurance, and potentially due on sale clause on your current note can be tricky, so make sure you’re working with an experienced real estate attorney on a transaction using this strategy.
  • Subject-to Sale: This is where you sell your home subject to your existing mortgage. It’s a little more complicated than that that but this is essentially what is happening. Again, it’s important to work with an experienced real estate attorney who is familiar with this process. The taxes, insurance, and potentially due on sale clause of your current mortgage add an additional degree of difficulty. But if you want to sell your home quickly, this can be a great strategy. Also, if you are in a distressed situation like a foreclosure, showing positive payments on your mortgage is the fastest thing you can do to boost your credit score.
Preparing to moving.

If you bought a home using owner financing and you wish to sell it, the process works just like if you had a loan from a bank. At closing, the balance of the owner financing is paid off at and you receive the proceeds from the sale after it is paid.

Utilizing owner financing is a great strategy to sell your house quickly, especially in a rising interest rate market. You can use any of these strategies to help sell your house using owner financing.

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