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January 20th, 2010 by Marco Santarelli
Owner financing is the most common way to buy a property with "no money down". Instead of getting cash at closing, the seller agrees to finance all or some part of the purchase price. What this means is the owner of the property will act as a bank and lend the buyer all or part of the money needed to purchase the property.
It is estimated that nearly 35% of all the properties in the United States are owned free and clear (no mortgage financing). A surprising number of those owners would be willing to finance all or part of the purchase price as a mortgage and take payments over an agreed upon period of time.
Generally, you will be getting a second mortgage from the seller. That means you will get the majority of your financing (the first mortgage) from a primary financing source like a bank. The seller would provide most or all of the balance in the form of a second mortgage.
There are four types of owner financing to that you could ask for:
Keep in mind that market conditions can affect a seller’s willingness to extend owner financing. In a buyer’s market, when homes are more difficult to sell, owners are more inclined to be creative and do whatever it takes to help sell their property.
Conversely, in a seller’s market, when homes are selling quickly, property owners have less incentive to extend financing.
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