Profile picture for user7381222

How does a lease purchase/owner finanicing work?

My husband and I would love to be home owners and we have recently heard of doing Owner financing, but we werent sure how this process works or where to start? Are there homes available in the New Tampa /Wesley Chapel area? My parents actually did an owner financing just a few months ago in a 55 community and they have bad credit with a short sale. So we were hopefully that we might have a chance :) Thanks.
  • November 09 2013 - Wesley Chapel
  • 0
    0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Be a Good Neighbor. Be respectful and on-topic. No spam or self-promotion! See our Good Neighbor Policy.

Answers (2)

Profile picture for wetdawgs
"owner financing" is when the owner is the lender.    Usually the buyer has to put down a substantial down payment (say 20 to 30%) and pay monthly payments to the owner.  The interest rate tends to be considerably higher than market rates (2x to 4x).     The buyer has to refinance in their own name in a set number of years, stipulated in the contract.  If the buyer is unable to do so, the owner will foreclose on the buyer.

"lease purchase" is different from "owner financing".     With rent to own or lease purchase it is basically renting from the owner until ready to buy at a time determined ahead of time (in the contract).   To ensure the option to buy, a substantial non-refundable down payment is paid upfront (usually 10 to 30%).   Rent is higher than fair market rent, with only the difference going to purchase.   If the potential buyer fails to get financing at the agreed upon time and amount, they lose all the money they've put in to date.

With both, the selection of homes is slim to none.   With both, the risks are very high and have potential to be very expensive.   With both, the current owners can reject your offer after evaluating your finances.

It tends to be a better idea to identify why you can't buy today, and develop an action plan to get to the right place with credit and saved up down payment/closing costs and emergency fund.   It will give you a far greater selection of homes and give you far less financial risk.
  • November 09 2013
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for CallTheSisters
Owner financing strongly favors the owner/seller and not the buyer.  One should approach any offer of lease purchase or owner financing with extreme caution and not without an attorney reviewing the docs you sign.

In the case of a lease purchase down money is usally required, an addtional sum may be paid monthly towards closing costs, there is a time limit to secure financing and the seller holds our money not necessarily in an escrow account, You may be responsible for repairs and taxes but do not have title to the home.

In the case of owner financing it also requires money down, a higher than market interest rate and many times a balloon whereby you must secure financing in a certain period of time of default on the owner financing mortgage. You pay for repairs and taxes.

In either case if the property does not appraise at the time you go to finance it - you can lose every dollar you invested.

That's why it is critical to have an attorney review the terms and condtions to be sure you are protected in the event you are not able to secure financing.  You also need to know where your money is being kept and in the event the property did not appraise and the seller would not lower the price you could get your money returned.

A Realtor cannot help you with the legalities.  These arrangements are precarious at best.
  • November 09 2013
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.