Offered owner finance (PMI, interest rate, approved, foreclosure)

[Joliefille]

We were approached by a neighbor who would like to sell her condo. She is a widow and wants a monthly income.

We have already been approved for a loan, so financing through a bank isn't an issue for us, but I can see we could save on points, origination fees, appraisals and PMI.

Are there any pitfalls in thise type of loan? We plan to use an attorney to write the contract if we decide to go through with it, but just curious to hear others opinions.

[lls1662]

Owner financing can be great. As you pointed out, there are alot of savings on fees. You definately need an attorney, but it should be no problem.

I've had bank financing and owner financing and love the ease of owner financing.

The only problem is the current owner will need to claim the mortgage payments as income, that way you can deduct the payments on your tax return. Otherwise it can cause problems. I had this happen when the seller did not claim the interest. Although I can report it on my taxes, they will go back to the seller about the interest income.

[davecj]

You'll want to ensure that she owns it free and clear. I imagine it will be a much shorter term (5-7 years) with a higher interest rate and a much quicker foreclosure process if it came to that.

[ocngypz]

Originally Posted by davecj

You'll want to ensure that she owns it free and clear. I imagine it will be a much shorter term (5-7 years) with a higher interest rate and a much quicker foreclosure process if it came to that.

And she could insist on a higher selling price than market comps dictate as well.