An important bucket list item for many Americans is to own their own home. However, many people are finding that it’s more challenging to obtain a mortgage and purchase a home today than it used to be. It can be difficult to achieve this lifetime goal, and this is often complicated by previous generations, not understanding that the process of purchasing a home has changed dramatically.
Before 2008, the real estate market simply didn’t have as many regulations as it does now. It used to be very easy for sellers to offer financing programs that were a bit more creative. This process made it far easier for buyers to obtain the mortgage they’d always wanted. However, those easy mortgages built up and brought on the real estate market crash of 2008, in which many individuals lost their life savings, and some lost their homes.
Sellers who are attempting to sell their homes to buyers who have credit that is less than perfect may decide to finance the purchase on their own. Owner financing is a valid method, but sellers who want to go this route may want to contact a Real Estate Broker/Realtor with experience, and a skilled attorney to help draw up the paperwork.
If you’re selling your home and would like to consider owner financing in Texas, there are a few things to keep in mind:
The SAFE Act – If a seller engages in more than five owner-financed transactions in a year, they now have to have a Residential Mortgage Loan Originator License, according to the Secure and Fair Enforcement (SAFE) for Mortgage Licensing Act. This helps keep individuals from financing many properties in a row and possibly not doing so ethically. There are some legal exceptions to this Act, such as providing mortgages to family members or selling your primary residence. It is wise to work with an attorney in these specific situations.
Dodd-Frank/TitleXIV – The Mortgage Reform and Anti Predatory Lending Act went into effect in 2014 and states that sellers must determine if a potential buyer can afford the house before they set up a contract. This law originated to eliminate finance deals to sell homes that more unfortunate borrowers couldn’t reasonably afford but signed contracts for anyway. The law prevents balloon payments as the mortgage matures, as well as penalty fees for pre-payments.
If you’re a Texas buyer and are interested in purchasing a home, you must be aware of the changes to the real estate market over the last decade. If you’re planning to owner finance your home, speak to a real estate attorney or qualified real estate professional to learn more about details for funding. These skilled professionals can help ensure that you manage your legal liabilities appropriately as you put your property on the market or purchase an owner financed home.