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How do I find sellers who will consider owner financing?

We tried to apply for a mortgage but were told the bank wouldn't approve bc of our DTI. We were also told there is no evidence other then this as to why we shouldn't be able to pay a mortgage payment since we currently pay 1500.00 monthly rent on our 3 bed 1 bath ranch. We have 10,000 down and need owner financing for three years until the bank will allow us to get a mortgage.
  • April 21 2012 - New York
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Answers (9)

When REALTORS(R) list homes they have to ask if the seller is willing to provide owner financing.  Call any reputable real estate firm and they can help you find someone willing.

Jeff Metcalf, REALTOR(R)
Watson Realty Corp.
[contact information removed by Zillow moderator]
  • April 22 2012
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Profile picture for Ofe Polack
First of all understand what the DTI means, This ratio looks at your monthly debt obligations (payments of interest and principal) as a percentage of your monthly income. If you have a significant amount of debt, your debt service burden may be too high for a lender to comfortably give you a loan. You need to either increase your income, or cut your debts.  You seem to dismiss the DTI by saying that you were told "there is no evidence other than this, as to why we shouldn't be able to pay a mortgage payment..."  in a nut shell other than the fact that your are spending more than you are earning.....?  That is a big thing!  You may have to pay some of the debt you carry until the DTI is acceptable.  Even if you were to find a seller willing to carry the mortgage, that seller would like to pre-approve you, and will find the same issue.  .  Owner financing carries a lot of risk for the buyers who will be asked for a higher non-refundable down-payment and also higher interest rates, due to the fact that they are high risk.  From my heart, I suggest that you may not be ready to purchase a home now, try to start paying the debt you are carrying and then you will find yourself in better position to apply for a loan
  • April 22 2012
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Again, I don't know if the numbers would work or not, but if you have some savings, it may be possible to pay down some of your debt, and then use a loan product that requires very little down.  Again, you have a mortgage shopping window, where any additional credit pulls are not going to harm you...so you might speak to a couple of different lenders to see if they can either get you approved or advise you on getting things in order so that you can be approved.

I understand where you are coming from. We couldn't get financed as quickly as we wanted last year, after losing our home in a tornado. And we really considered trying to find an owner carry option, as we had a substancial downpayment. I am so glad we did not do that. It just narrows your options to a tiny segment of the for sale listings and the terms virtually ALWAYS favor the seller.

In fact, you may find once you are approved and begin to check out the market, that you want something else besides the home you are living in. Regardless, best wishes.
  • April 22 2012
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Profile picture for user777103
Thank you. All of your replies were helpful. Unfortunately te owners of the house we rent are putting in on the market in June and although they gave us first option to buy if we can't get a mortgage we will have to be out of here soon. They weren't to keen on the holding the mortgage idea bc the money from this sale is going to pay of their current residence.
  • April 22 2012
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I would speak to more than one banker/mortgage brokers, you may hear different things, and you might also find one that is willing to assist you in getting your finances where they need to be. If it is a debt to income issue, it seems like you could just try to get some of the bigger payments payed off. Sometimes you can change your situation very quickly....I'm not sure why it would take three years?

If you need to understand DTI or any other credit issues better, go to www.myfico.com. I've found it very helpful. I tend to agree with Wetdawgs, owner finance, or rent to own situations tend to highly favor the seller. Good luck with whatever you decide to do.
  • April 22 2012
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There are a few sources, but as mentioned previously, they are harder to come by and the terms may be a bit more difficult to attain. One parameter that I have found to be more of a challenge is the downpayment. This amount will obviously depend upon the asking price of the home. Some owners ask 10% to 30% due to their risk and the need to apply some of those funds to your purchase on the back side.

There are additional options, but please be aware that they will all be more costly due to the risk. If you don't HAVE TO move, you may be better served  to wait until your situation improves to allow more favorable terms.
  • April 22 2012
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Profile picture for wetdawgs
While there are a few properties out there where owners will consider owner financing,  please be aware of a couple of limitations.

The requirement will narrow your choices considerably.  Do you wish to settle for a house just because you can get owner financing?  (Hou se buying is not an emergency.)

Owner financing tends to be at a higher interest rate than conventional financing.  The last one I heard was 10%.  
  • April 21 2012
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Call your local real estate offices...most agents have or know of someone that will carry the mortgage if you have decent credit and references. Good luck.
  • April 21 2012
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realtor will know...

  • April 21 2012
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