What Are The Pros and Cons of Owner Financing?
Obtaining a mortgage from a bank is very difficult.
According to Fannie Mae, they found the following average approval requirements:
- Average FICO score – 767
- Average equity percentage – 29%
- Average down payment – 21%
- FHA loans, which once averaged in the mid-600s for FICO scores are now coming in at an average of around 716
Even though home prices are improving and the housing market in Austin, Texas is stronger than other areas, qualifying for a loan is still as difficult as ever. And the statistics above probably eliminate around 50% of potential home buyers.
So how can you sell your house fast in Austin, Texas if banks aren’t lending?
Owner financing may be the best solution.
The infographic below details what owner financing is, and what the pros and cons are for both the buyer and the seller.
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What is Owner Financing?
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That’s a tough call. Personally I’d never go with owner financing because it just seems too dicey. It’s people and banks taking risks that put the housing market into trouble to begin with.
Ironically Jason, owner financing had a significant role in Austin not having as severe of a downturn in the real estate market. With bank lending so stringent, a non qualified buyer today was a very qualified buyer of yesterday. Also, seller financing is giving distressed home owners with little or no equity a chance they other wise wouldn’t have received with a larger buyers’ pool. Seller financing transactions have helped keep many homes out of foreclosure, which has kept sales prices higher.
Now that’s intriguing. In my mind, it would seem safer going the bank route, but in retrospect I guess there could be more flexibility and potentially lower payments with this kind of financing arrangement. Thanks for the update.