St George Utah Owner Financing

There are currently hundreds of homes available for St George Utah Owner Financing as well as northern Utah. Joel and Summer Robertson (435) 773-1220 specialize in connecting buyers with sellers who are willing to seller finance homes all across the state of Utah, not just in the Saint George area. We are proud of our extremely high owner financing success rate. We experience great satisfaction each time we are able to help our clients become Utah homeowners.

Benefits to Buying a St George Utah Home with Owner Financing

The biggest advantage to a southern Utah home buyer or northern Utah home buyer when purchasing a home with owner financing is not having to work with a bank to secure financing. Banks have very strict rules, policies and underwriting methods that exclude many good and honest prospective homebuyers. Additionally, banks typically have enormous lending fees that owner financing does not have.

What is Owner Financing and Who Qualifies?

Owner financing takes place when the owner of a home acts as both the seller and the bank. It’s very similar to bank financing, but the buyer repays the seller through monthly payments over an agreed-upon period of time and an agreed-upon interest rate and terms. 

Just about anyone can qualify for owner financing. It largely depends on the amount of money the buyer can put towards the down payment. We’ll discuss the down payment more in detail below. Just keep in mind there are no restrictions on the type of home or property that can be purchased. And, anyone can use owner financing.

Seller financing is most typically used when a home buyer cannot qualify for traditional financing. Reasons they may not qualify for bank financing may include:

• Self-Employed
• Temporary unemployment
• Low to no credit
• Recent bankruptcy
• Not a U.S. Citizen
• Undocumented Income 
• Other reasons

The Owner Financing Process

Whatever your individual circumstances may be, we are here to help you with your St George Utah owner financing and northern Utah seller financing. The first step is to call us so that we can discuss your needs. We will talk about:

• The size and type of home you would like to own
• How soon you would like to move into your new home
• The monthly payments you can personally afford
• The down payment money that you have or will have
• The seller financing process
• Any questions you have for us

After our first meeting, we’ll begin looking for your dream home. We’ll e-mail you a list of homes that match your personal criteria or you can start looking for homes here. Alternatively, we can meet in our office to go over the list of homes together. You’ll then want to narrow down that list to your favorite 3-5 homes. Next, drive by each of those homes and make sure you like the outside of each home and the neighborhood.

We will then make an appointment with the seller to view the inside of the house. If you decide it’s the home for you, we will make an offer on it together. We will eventually reach an agreement on the price and seller financing terms of the seller financing. The final step is to hand you the keys to your dream home!

Southern Utah Owner Financing Terms

Many sellers who have already decided they will do owner financing with a buyer already have specific terms in mind. Others may be open for negotiation. Below are some of the primary terms that need to be agreed upon by both parties.

Down Payment

Most sellers in southern Utah and norther Utah will want to reduce their risk as much as possible. Like a bank, one way sellers can reduce their risk is by requiring a down payment from the buyer. Oftentimes, this down payment can be between 10%-20% of the purchase price. 

For example, you find a home that is offering seller financing in Salt Lake City, Utah. You and the seller agree on a purchase price of $300,000. The seller requires that you initially pay 10% or $30,000 towards the purchase price. Therefore, your loan amount would be $270,000. 

Similar to a bank loan, if you stop making your payments, you would be considered in default. At this point, the seller could potentially take the house back from you and keep any payments you’ve made. Your down payment shows the seller you are fully committed to making all your payments in a timely manner. Studies show that the more a buyer contributes towards the home purchase, the less likely the buyer will default.

Length of the Loan

The amount of time you have to repay the seller is also negotiable with St George Utah owner financing. Some sellers are willing to collect payments over 30 years, while others may want to be repaid within 10 years. Whatever the time frame may be, the loan can still be amortized over 30 years. This helps keep the payments as affordable as possible for you.

Interest Rates

At the publishing of this article, we are generally seeing St George owner financing and northern Utah seller financing interest rates 2%-3% above 30-year FHA mortgage rates (current FHA rates on Freddy Mac). However, this is still much lower than other alternatives like “hard money loans,” which can be 6%-8% higher than FHA rates. The interest rate we negotiate with a seller will largely depend upon the size of your down payment. But, just keep in mind that there needs to be something in it for the seller too.

Seller financing loans and their accompanying interest rates can also take various forms:

• Fixed-rate: The interest rate and payment stay the same throughout the entire duration of the loan. The balance of the loan is paid down over the course of regular payments. This is the most common form of seller financing in southern Utah. The fixed-rate loan is what we suggest to both the buyer and seller for the sake of simplicity.
• Interest-only: The buyer pays only interest with no amount going towards the balance of the loan. This is typically a short-term loan with a balloon payment at the end of the term.
• Adjustable-rate: The interest rate adjusts periodically throughout the life of the loan and is usually based on a benchmark or index. 

Balloon Payment

This is a lump sum payment at the end of a loan term, which pays off the seller in full. Although most buyers will either sell, refinance or pay the home off earlier than required by the loan, some sellers don’t like the idea of potentially waiting 30 years to be paid in full. Thus, a handful of sellers will ask for the loan to include a balloon payment at the end of a certain period of time. For example, a loan may be amortized over 30 years to keep the payment low. But, there may be a balloon payment in 10 years.

Structuring a St George Utah Seller Financing Deal

There are several ways to structure a seller finance deal in St George Utah. Each varies in how they affect the buyer’s security in the property and the seller’s ability to regain title and possession should the buyer default. We will cover some of the most common.

A Promissory Note and Deed of Trust 

This is the most common way to structure a seller financing deal in southern Utah. It’s how most banks structure their traditional loans, and it’s what people think of when the word “mortgage” is used.

The promissory note states the amount the buyer has borrowed and the terms of repayment that must be followed.

The Deed of Trust is a security instrument that gets recorded against the title as a lien showing that there is a loan against the property. It allows the seller to foreclose on the home should the buyer default on the terms of the promissory note.

In exchange, the buyer is put on title and a deed of ownership is recorded with Washington County Utah Recorders Office.

Contract for Deed

This is probably the second most common way to structure a St George owner finance deal. It seems to be growing in popularity in the southern Utah real estate market.  A contract for deed (or uniform real estate contract) is similar to a promissory note and deed of trust (see https://realestate.utah.gov/forms/Uniform_REC.pdf). The primary difference, however, is that the seller remains on title until the debt is repaid in full. The buyer may record a Notice of Interest against the property to protect their rights of ownership. Many sellers and buyers agree on this structure because it’s much less time consuming and expensive for the seller to regain marketable title. It’s also easier for the seller to take back possession of the property should the buyer stop making their payments.

Lease Option

The lease option is how many buyers and sellers structure their owner financing deals in Saint George Utah. The owner first agrees to lease their home to the renter. In addition, the renter pays for an “option” or right to purchase the property with non-refundable “option money”. This option agreement has a time limit and states the agreed upon purchase price. Typically, that option money is applied towards the down payment if and when the renter decides to purchase the property. If the renter chooses not to purchase the property, the renter forfeits that option money to the owner. 

The renter may exercise their right to purchase the home from the owner using seller financing. In this case, either a promissory note and deed of trust or a contract for deed is used.

Risks of Saint George Utah Owner Financing to Buyers

One of the most substantial risks to buyers in owner financing deals has to do with how the payments are handled and tracked. If the seller is handling payments, you can only hope that the seller is organized and has excellent record keeping skills. This means that you would want to keep good records of your own in case the seller makes a mistake.

For owner financing transactions that we arrange for our clients, we advise both the buyer and seller to allow a third-party escrow service provider to handle all payments and disbursements. The cost is minimal at about $20 per month, but the headaches and heartache that can be saved is priceless.

Advantages of Saint George Utah Seller Financing to Buyers

The primary advantage to seller financing for buyers is that you don’t have to work with a bank. Banks have very strict rules and guidelines and the full approval process can take several weeks. If you don’t fit in their box of parameters, you’ll be denied the loan. If the appraisal comes in too low, your loan will be rejected (unless you make up the difference). Seller financing typically has much less red tape and criteria than traditional loans making it less stressful and time-consuming. You may very well be able to secure seller financing even if you are not a U.S. citizen, have a recent bankruptcy on your record or a low FICO score, or you’re self-employed or temporarily unemployed.

Another benefit to seller financing is you can negotiate terms of the loan with the owner. This can include down payment amount, interest rate, and the existence of balloon payments or prepayment penalties. Most banks will not generally negotiate with you on their terms.

Consult an Attorney

Owner financing in St George Utah offers great advantages to both buyers and sellers of residential real estate. However, we advise that you consult with an attorney before entering into any contracts to make sure you understand the contract terms, your legal responsibilities and consequences for not fulfilling those responsibilities. We at Robertson Real Estate often work with an attorney as well as have title companies handle escrow on each of the owner financing transactions we put together.

Let Us Help You With Saint George Utah Owner Financing

We are the local experts in Saint George Utah owner financing and connect buyers with sellers across the entire state of Utah. We’ve been helping home buyers and sellers for almost 15 years. Real estate and seller financing happens to be our life. Allow us to help you with your home buying and owner financing needs so that you can live your life. Contact us at (435) 773-1220 or e-mail joel@homeinstgeorge.com.