The process of buying a house with seller financing in DFW
March 15, 2021
Have high income?
Tired of renting but can’t buy because of poor credit or no credit history?
Seller-financed home purchase (aka owner-financed purchase) may be a solution for your situation. Instead of good credit and lots of mortgage-related paperwork, they usually require a large down payment (typically 20% or more) and very little paperwork.
How much is 20%-25% cash to close? On a typical house of $250,000 this would translate to about $50,000 to $62,500 in cash to close. This will pay for your down payment, closing costs, and pre-paids such as insurance and taxes. The house will be in your ownership on day 1.
(note that if you used a conventional mortgage with 5% down payment, your cash to close on the same house would be approximately $20,000, not including the cash needed to outbid other shoppers on the market)
DO NOT HAVE A 20%-25% CASH TO CLOSE? TRY RENT-TO-OWN PROGRAMS, INSTEAD!
HOW DOES SELLER FINANCING WORK?
You will start by finding out how much an investor would agree to loan to you using seller financing. Very often, your maximum loan amount depends on your maximum cash-to-close funds available.
Once your seller-financed loan amount is estimated, you will work with an investor to purchase any house of your choice within your agreed-upon price range.
- On some rare occasions, you will find an investor who already has a house that he is offering for sale with seller financing. Generally, I recommend picking your own house rather than choosing out of a selection of 1 home only.
The entire process will generally follow the diagram below
Step One: Decide whether seller financing is right for you and select an investor
- Education: Very few renters (and their Realtors) really understand the seller financing process correctly. If you do not understand the process, you won’t be as successful in using it.
- Watch my educational videos on the realistic rent-to-own options that will work for the Dallas-Fort Worth area of Texas.
- Join my Seller Finance DFW with #Elena Facebook group to see the types of homes and cash to close needed on typical seller financing deals.
- Send me your initial information: Fill out the form below so I could help you to assess your options
- Consultation: Let’s have a consultation (phone, video chat, text, in-person meeting) about the rent-to-own options that would fit your situation
- Select strategy: Select a rent-to-own option to try. I will guide you through this part and advise backup options if needed.
- Sign a Buyer Representation Agreement so I can start gathering your financial data into a package to present to various investors who might be interested in financing your home.
Step 2: Apply and Get Approved for a Seller Financing Deal
- Application process. The application process often consists of submitting your information to a program or to an investor for initial analysis. I will guide you through this part.
- Collecting, scanning, submitting financial documents. Depending on how quickly you can collect and gather requested documents and the proof of the option funds, this step can take anywhere from 1-2 days to 4-6 months. I will guide you through this part the best I can.
- Get Approved. You will be either approved for a certain monthly rent amount or for a certain price range for houses. I will help you to understand what those numbers mean for you and how to get approved for a larger amount (and a bigger, better home) if needed
- Understand the financial details of your offfer, such as rent amounts, option, repairs, offer renewal costs, buyout costs, etc. I will guide you through that part
- Understand the legal details of your offfer, such as breach of contract, loss of option, buyout process, and more. Please review your proposed contract with a lawyer specializing in rent-to-own disputes. I can recommend a lawyer.
Step 3. Start Renting, Do Credit Repair, Get Ready for Mortgage
- Shopping for a home. Most lease-to-own programs will buy any home in your price category FOR YOU. So, once you have your approved price range, go on Zillow and look at homes available in that price range. I will take you on shopping trips where you can visit the properties and make your selection
- Secure a home. Once you selected a home, the rent-to-own provider will attempt to buy that property on your behalf.
- Be aware that the DFW home market is very difficult for home shoppers at the moment. You can get outbid on the home of your choice. Have several properties selected for bidding to make sure at least one of them is purchased.
- Get up to $1,000 in CASH BACK to help you pay for your moving expenses and new cute home toys for your family! The cash back amount will depend on the house price. Contact me for details.
- My fees are paid by the rent-to-own program. You do not need to worry about my fees unless you yourself select to pay them.
- Prepare for your mortgage application process. While you are renting, you will need to get ready to secure a mortgage in order to buy the house you are renting. I can recommend a credit repair company and a mortgage lender who will help.
- Secure a mortgage. Apply for and secure a mortgage. Understand the down payment and cash-to-close requirements. Obtain a pre-approval for your mortgage
- Obtain ownership rights to the home. Once you and your landlord/seller agree on the buyout date and amount, use your mortgage lender to fund the sale of the house from your landlord to you.