What's Owner Financing Mean?

It may be difficult or perhaps impossible for us to qualify for a loan if we have poor credit history. This is why we need to know what's owner financing mean. Owner financing is a special arrangement that enables us to purchase a home without having to meet the requirements of a conventional mortgage.

Owner Financing What Does it Mean?

• Owner financing is a situation when the seller of the home gives some or all of the financing directly to the buyer. 

• It is also referred to as creative financing, a purchase money mortgage, or seller financing. 

• Financing of this kind is more typical in transactions involving relatives or acquaintances.

How Owner Financing Works?

Purchasers must still agree to make monthly payments for the term of the loan and provide a down payment. When the purchase closes, the buyer is likely to sign a promissory note with the stipulations outlined in it.

The terms of the promissory note will state:

• Loan amount

• Down payment

• Purchase price

• Details of a balloon payment at the end of the loan

• Payment schedule and monthly payment amounts

• Penalties for missed payments or default

Owner-financed real estate may have a shorter term—five or ten years—and necessitate a sizable balloon payment to settle the remaining loan balance at the end of the term, in contrast to conventional 30-year home mortgages.

Pros and cons for buyers

Pros and cons for sellers

This is what's owner financing mean.