While the overall housing market appears to continue to improve in 2017, seller financing will still play a key role.
Some forms of real estate financing appear to be getting easier to obtain, but there are challenges. Offering owner financing, and doing it well is still important for investors and sellers.
The Lending Landscape in 2017
So far 2017 has seen lenders, builders, and buyers bullish on the market. However, while there seems to be increased easing in lending for real estate investors, there doesn’t appear to be much change for regular home buyers. At least not yet.
A variety of new lenders are offering lines of credit, unsecured business loans, stated income loans, and very high LTV products for real estate investors. These lenders are offering loans to borrowers with lower credit scores, and even those with previous foreclosures and bankruptcies. The Mortgage Bankers Association estimates commercial real estate finance will hit a new high of $515B in 2017. Much of that could be used for residential investment property.
Unfortunately, we have seen banks and mortgage lenders offering the same types of deals and easier underwriting for the regular home buyer.
Loans for Home Buyers
There are some very aggressive borrowing options for home buyers. These include low down payment FHA, VA, and USDA home loans, as well as the 203k loan. Rates are still good for now too.
However, the underwriting process for regular home buyers appears to still be very rigorous. Some just don’t have the piles of paperwork lenders are demand, or they don’t want to take a week or more off work to chase it all down. This means that many would be buyers just aren’t bothering to apply for mortgages.
Many of the most affordable properties out there don’t qualify for traditional financing either. Either they are too cheap and lenders don’t want to make loans that small, or they need repairs which lenders demand fixed before they’ll extend credit.
Smart Seller Financing
The above all means that seller financing is still very much needed to help regain homeownership levels, and for owners to sell their properties quickly. Of course, we are still working under the Dodd-Frank Act for now, and sellers need to make sure they are offering both legal and attractive deals.
If you are thinking about offering selling financing on a property you own, then be sure to reach out and consult a real estate attorney or title company to find out what you can and can’t do. They should also be able to help you with the paperwork you need to keep all parties safe in the transaction. Make sure you do some market research too. For this to work for you, you have to be competitive. For example; ensuring the down payment and monthly payments you are asking are appealing to the buyers out there.