What is Owner Financing or Lease/Purchase?

What is Owner Financing or a Lease/Purchase?

Owner Financing simply stated is a Seller willing to help a Buyer of a house by financing part or all of the purchase price. Usually, the Buyer does put money down and the Seller will carry a first mortgage, second mortgage or an Agreement for Deed (Land Contract).

A Lease/Purchase agreement usually is separate agreements between the parties: a lease and a purchase and sale agreement. The tenant/buyer leases the house for a specific monthly rent and a specific term. Part of the rent may or may not be applied to the purchase price. The earnest money deposit, price and terms of the sale are negotiated in the Purchase and sale agreement. Each agreement usually has a cross default clause - it the tenant/buyer does not pay rent as agreed the lease agreement, the Purchase and Sale Agreement is null and void and any Earnest Money Deposit is forfeited by the the tenant/buyer. The price of the home may increase if the lease/purchase has a term on many months or years.

Lease/Purchase arrangements work very well with buyers that need to improve their credit. Many lenders consider the purchase as refinance and increase equity may be considered in the loan to value calculation.

I personally recommend sellers lease/purchase a home before carrying a mortgage for the buyer. This way the seller will know if the buyer makes their payments on time. Foreclosure is much more difficult than an eviction.

Call me to discuss your situation.

Lewis Burger

770/442 0671