Do Not Qualify for a Loan Why Not Make Payments Directly to the Seller?
Probably before setting out to buy a house you may have wondered why many people take out mortgages when they could simply make payments directly to the owner. Owner-financing is rare but is possible under certain conditions which are covered below.
Owner-financing deals are unusual since many owners are not in the position to be able to pay for two mortgages at once. For example, if the seller has $110,000 left on his mortgage but is selling the house for $150,000, they will immediately gain a profit of $40,000 if you take out a mortgage. Given that your mortgage will cover the lump sum of $150,000. Most sellers prefer this method, likely many need the money to use it for a down payment on the new house. Furthermore, many do not expect to live another 30 years and as a result would prefer that the entire amount be paid upfront as opposed to installments. However, there are cases when sellers will prefer the owner-financing option.
Owner-financing involves the seller paying off the existing mortgage, and this is only possible if the seller has an extra $110,000.  For those that have this kind of money then this can be seen as an investment. By investing money in the stock market they can either gain or lose a certain percentage, but owner-financing could be seen as a guaranteed return. In fact sellers can charge a higher interest rate than the banks would give you for a mortgage especially for those that do not qualify for a loan. In this case scenario the only way that the sellers will lose out is if the buyer fails to make monthly payments. However, they can always foreclose and if they sell the house for at least as much is left on the loan the seller will not be at a loss.
There is also the possibility that you may get approved for a loan that will not cover the cost of the house. If you really want to buy it, offer a higher interest rate to the seller. Some sellers may opt. to owner-finance part of the loan if provided a higher interest rate. Later on apply for a larger loan and once you get approved, pay off the rest of the house.
Therefore, if you are having a hard time getting a loan, consider owner-financing or partial owner-financing. Although owner-financing is rare, searching around for such an opportunity may be your best option.