St George Utah Owner Financing
There are currently hundreds of homes available for St George Utah Owner Financing. Joel and Summer Robertson specialize in connecting buyers with sellers who are willing to seller finance homes in St. George Utah and other southern Utah towns. We are proud of our extremely high owner financing success rate, and we experience great satisfaction each time we are able to help our clients become homeowners.
Benefits to Buying a St George Utah Home with Owner Financing
The biggest advantage to a St George Utah 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 people looking to purchase a home. Additionally, banks typically have enormous lending fees that owner financing does not have.
What is Owner Financing and Who Qualifies?
Owner financing, also referred to as seller 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 that there are no restrictions on the type of home or property that can be purchased or who 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:
- Temporary unemployment
- Low to no credit
- Recent bankruptcy
- Not a U.S. Citizen
- Undocumented Income
- Other reasons
The Owner Financing Process
Whatever your individual reason or circumstances may be, we are here to help you with your St George Utah owner 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 best 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 based on the photos and other information provided. Next, you can 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 and come to an agreement on the price and 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.
Most sellers in southern Utah will want to reduce their risk as much as possible. Much like a bank, a primary 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 Southern 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.
Later, if you stop making your payments, the seller could potentially take the house back from you and keep your down payment and any other payments you’ve made. Your higher down payment shows the seller you are invested and fully committed to making all your payments in a timely manner. Studies have shown that the more a buyer contributes towards the home purchase, the less likely the buyer will walk away from the property or otherwise go into 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 paid in full within 10 years or less. Even if the loan duration is shorter, the loan can still be amortized over 30 years in order to keep the payments as low as possible.
At the time of the publishing of this article, we are generally seeing St George owner financing interest rates between 6.5%-7.5%. Many of the sellers we work with charge between 2.5%-3.5% higher than traditional lending institutions, but this is still much lower than “hard money loans” which can be as high as 10%-12%. The interest rate we negotiate with a seller will largely depend upon the size of your down payment.
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 and the form we at Robertson Real Estate 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.
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, some 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 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 also 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 also allows the seller/lender 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 and seems to be growing in popularity in the southern Utah real estate market. It’s similar to a promissory note and deed of trust except that the seller remains on title until the debt is repaid in full. Many sellers choose this structure because it’s much less time consuming and expensive to regain marketable title and take possession of the property should the buyer stop making their payments.
The lease option is how many buyers and sellers structure their owner financing deals in Saint George Utah. The owner agrees to lease their home to the renter, as well as grant the renter the “option” or right to purchase the property for an agreed upon amount sometime during the lease term. The renter purchases this option from the owner using “option money.” Typically, that option money is applied towards the down payment if and when the renter decides to exercise the option and purchase the property. If the renter chooses not to purchase the property, the renter forfeits that option money to the owner.
When the renter exercises their right to purchase the home from the owner, usually either the deed of trust or the contract for deed is used to secure the buyer’s rights of ownership.
Risks of Saint George 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 as the buyer would need to be extra careful to keep your own records 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 contract servicer 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.
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.
Let Us Help You With Saint George Utah Owner Financing
Joel and Summer Robertson are experienced in helping both buyers and sellers navigate owner financing transactions in Saint George Utah and other southern Utah cities. Real Estate and seller financing happens to be our life. Allow us to help you with your home buying and owner financing needs to that you can live your life. Contact us at (435) 773-1220 or e-mail email@example.com.