What do i need to know before buying an owner financed home?
Sometimes there is a reason the home is owner financed. One thing you should do is to make sure there is a clause for an appraisal to be done and that it must come in at or above the sale price. I have seen people that have taken the path of least resistance and overpaid for a property simply because the financing was easy. That is not always the case, but it can be.
You should make sure that a standard purchase and sales **contract **is used. Especially if no Realtor is involved. If you have to pay an attorney a couple hundred bucks to drawn one up, do it. It is well worth the cost.
You need to know the terms of the note. Can pre-payments be made? Is there a balloon clause [which means the payments are based on a 30 year schedule but the owner want the balance owed in less time than that]? Who is going to record the mortgage?
In many cases, owner financing is done because the buyer will not qualify for VA, FHA or conventional financing. You should eliminate those possiblities first. Sometimes, there could be a property issue, so you should be sure a home inspection is done.
That said, owner financing can pave the path to successful home ownership. It is not always a bad thing. You just need to protect yourself befoere any notes and mortgages are signed.