If your credit is not that great, buying a house might be out of the question at this time. Actually, buying a single-family home in the traditional way might be out of the question, but there is another option. You could pursue seller financing as a way to become a homeowner now without getting a mortgage loan yourself. Here are the pros and cons of this method.
What Seller Financing Is
First of all, you will need a good understanding of what seller financing is before you can understand the pros and cons it offers. Seller financing occurs when the owner of a house keeps the mortgage on the property but sells the house to a buyer. The buyer pays the seller for the house just like he or she would if there was a lender involved. The buyer, therefore, does not need to get a mortgage to buy the house. When people use this method, they set a date for the contract to end, which is usually between five and ten years after the sell date. At that point, the buyer would need a loan to buy the house outright.
The Pros of Using Seller Financing to Purchase a Home
Using seller financing to buy a house offers a way to buy a house if you do not qualify for a mortgage because of your credit. If you could not get a loan, this method allows you the opportunity to become a homeowner without the need for a loan. Two, when you buy a house through seller financing, you really own the home. You can make changes to it if desired, and you also inherit all the maintenance and repairs the house needs. The house is yours, and you get everything that comes with it.
The Cons of Using Seller Financing to Purchase a Home
There are few downsides to using seller financing, but one is that you might pay more for the house. The seller can charge a higher interest rate than a bank would charge, and this could increase the cost of your payments. Two, if the seller stops paying the mortgage on the house, the lender could pursue foreclosure. In this event, you would lose the house and the money you put in it.
As you view the pros and cons, you will know what the right choice is for you. You can learn more about properties that offer seller financing by talking to a real estate agent.