What is Florida Owner Financing?
In the more common kind of home purchase, a lending institution provides a mortgage loan to the purchaser. In an owner financing transaction, the seller carries all or part of the purchase price minus the down payment. Florida owner financing, also referred to as creative financing or seller financing, tends to become more frequent when lenders tighten up their lending requirements.
Florida owner financing is possible even if an existing mortgage loan already encumbers the property, although it is possible the lender on the original loan will accelerate the loan (make full payment due immediately in accordance with the terms of the mortgage) when the sale occurs. This typically occurs when the mortgage loan contains an alienation clause. Whether the property is in North Florida, Central Florida, or South Florida, owner financing is available.
Because owner financing is less common than financing from a bank/institutional lender, some real estate listing agents may not even ask a seller if owner financing is a possibility. Should the seller be asked, the answer is often a firm NO, but that can be because the seller has not considered the advantages owner financing could provide to him/her.
Are you in the process of refinancing your current home? Do you need help with home title services? If you have any questions or needs, contact our Attorneys to find out how we can help you easily navigate the real estate purchasing/mortgage process and how we can provide you with the peace of mind you deserve. True Title is a company setting a standard of excellence industry-wide. We at True Title have been committed to excellence in customer service since 1998.
How Florida Owner Financing Can Help Sellers
Owner financing can lead to a quicker sale. This possibility can be particularly attractive when the home has already been on the market for a while.
Seller financing can also raise the sales price. The owner may be able to reach full list price or even more.
The seller can also end up paying less in taxes. This happens when the money from the transaction comes in over a number of years. For a given year, the seller only pays tax on the income received during those twelve months.
Additionally, the monthly payments from Florida owner financing can improve the seller’s cash flow and provide more disposable income.
Creative financing can also enable the seller to obtain a higher interest rate than he/she could reasonably anticipate from many other forms of investment.
How Florida Owner Financing Can Help Buyers
Owner financing can benefit buyers as well. First and foremost, it is easier to qualify for the loan. For buyers whose credit histories are less than perfect or whose other financial information could prompt a bank to deny their mortgage application, this can be an enormous benefit to them.
Even when Florida owner financing is on the table, the seller may still want to see a credit report. But even when this is the case, the owner is likely to consider the information and the possible sale with a less stringent and more flexible attitude than an institutional lender.
Florida owner financing also allows for a variety of payment options. These include interest only, balloon payments, fixed-rate amortization, and more. Interest rates can either change in accordance with fluctuations in the national rate, or they can remain fixed.
Also, there is often more flexibility relative to the down payment with Florida owner financing. If the down payment is more than the buyer can comfortably manage, some sellers accept payment in installments.
In addition, closing costs are lower because no lender is involved in the sale, and that automatically eliminates a number of expenses including discount points and origination, mortgage processing and mortgage administrative fees.
Similarly, because no lender is involved in the process, the sale closes more quickly and the buyer can move into the house that much sooner.
It is important to understand that the terms of a home purchase with creative financing are negotiable as long as the parties involved obey usury laws and other applicable regulations. The down payment, for example, can exceed 30% of the sale price or it can be quite small, although many sellers ask for down payments substantial enough to protect their equity. They may also feel that the more money the buyer pays up front, the less likely it is that the property will ultimately go into foreclosure due to nonpayment of the mortgage premium.
The various possibilities with regard to the negotiation result in differing types of Florida owner financing.
Types of Florida Owner Financing
Land Contracts, also known as Contracts For Deed, do not immediately transfer legal title to the buyer, who instead receives an equitable title. The seller will deliver the Deed conveying fee simple title to the buyer after the final payment is made toward the owner financed mortgage. The Contract For Deed serves both as a deed (conveyance of equitable title) and an owner financed mortgage. Also, it is important to realize that the buyer cannot sell or refinance the property until he or she has possession of the deed after the terms of the mortgage are satisfied.
All-inclusive mortgages, also called all-inclusive trust deeds or AITDs, are those in which the seller carries the mortgage for the entire purchase price minus the down payment. The mortgage may include an underlying loan to help with the home title finance. If so, the seller will receive an override of interest on the underlying loan.
A junior mortgage is one where the buyer takes title as per the terms of an existing loan or takes out a new first mortgage. At that point, the buyer receives the deed and gives the seller a second (Junior) mortgage. The second (Junior) mortgage covers the sale price minus the down payment and the amount of the first mortgage.
In a lease-purchase agreement, the seller gives the buyer equitable title and leases the property to him or her. After the terms of the agreement are fulfilled, the buyer receives the deed (title to the property) and, generally speaking, takes out a loan to pay the seller. When paying the seller, some or all of the previous rental payments count toward the sale price in accordance with the terms of the lease-purchase agreement.
When you have questions about Florida owner financing and other issues relating to your title transfer, we are here for you.
Are you in the process of refinancing your current home? Do you need help with home title services? If you have any questions or needs, contact our Attorneys to find out how we can help you easily navigate the real estate purchasing/mortgage process and how we can provide you with the peace of mind you deserve. True Title is a company setting a standard of excellence industry-wide. We at True Title have been committed to excellence in customer service since 1998.
How Florida Owner Financing Works
The sale of a home via creative financing has four steps.
First, the seller needs to determine if he/she owns the home outright or if there is still a mortgage encumbering the property. If there still is a mortgage encumbering the property, owner financing may not be an option. True Title will help the seller understand what laws pertain in the particular situation.
Second, assuming owner financing turns out to be possible, sellers start looking for buyers. This can be done online, with pamphlets, and/or via other forms of advertising. It is important for sellers to let potential buyers know owner financing is available. This will catch the attention of people who know they are unlikely to be approved for conventional financing. Sellers will most likely desire to assess a potential buyer’s dependability and likelihood of repayment, perhaps by checking the buyer’s credit score. They are, after all, essentially loaning the buyer money and helping them to satisfy their home title finance needs.
Third, after the seller finds a buyer, the two will negotiate the purchase agreement. One of the key aspects of this is finding an interest rate that is acceptable to both parties. As mentioned above, buyers should anticipate that sellers will require an interest rate somewhat higher than what a bank or other institutional lender would offer.
Fourth, upon the successful conclusion of the negotiation and execution of the agreement by the parties, the buyer makes the down payment and can move into the home at his or her convenience.
True Title desires to be your Florida title insurance company for all of your Florida title insurance needs, and especially in the area of Florida owner financing. The title professionals at True Title will help you to navigate through these uncertain waters and answer any questions you may have about home title financing. Call us now to get started – (877) 785-8792.
