After fixing up the house and offing a carry back with a baloon payment to be paid in 2-3 years forcing a refinance that might limit people who might buy the house, would you consider another option? Fixing up the house and offering owner financing without a balloon that could scare away buyers worried about finding financing at a regular lender before the balloon comes due. After that, you get a note buyer to come in an give cash for the mortgage, that being the owner you have the right to sell. At that point, you can continue on to buy another house, fix it up, carry back the financing and then sell the note again. Meanwhile the person who bought the house makes payments to the note buyer.

Anyway, I love the site, thanks again for the response.

I’m just poking around in the area of seller financing/owner financing myself (and mostly from the point of view of the owner/investor), so I’m pretty far from an expert. Here’s a few nuggets, though, as far as general expectations:

1) I don’t know of any resources specifically geared towards the buyer, as far as owner financing. In general, you should expect to pay a higher interest rate, and I’ve seen figures from 8-10% thrown around, as far as interest rates offered to buyers via owner financing. In many cases a balloon payment is also due after 2-3 years.

Most sellers really want you to refinance the loan when your credit improves, as the seller gets paid off in full when that happens. So they’ll usually structure the deal to encourage that, usually with high interest rates and balloon payments.

2) Stepping back a bit, if your credit issues really were 5-7 years back and you’ve been good since then, your credit might be good enough for a traditional mortgage. A couple of years of good behavior is usually sufficient to wipe a lot of credit problems off your record. So check your credit score first, as a traditional mortgage will almost always offer you a better interest rate than an owner financing deal.

3) The down payment you should expect to pay really depends on the seller. They typically require at least 5-10% down (and sometimes as much as 20%), as they need some cushion in case you trash the place and stop making mortgage payments, leaving them no choice but to foreclose on you, sitting back at square one (except with a trashed house).

Depending on how desperate the seller is, your down payment will likely slide up or down. Investors who do such deals regularly will likely stick to their guns, but if you find an owner who can’t make payments on their house anymore and just wants to get out from underneath it, you might be able to pay little down and get a fairly competitive interest rate.