Owner Financing: A Win-Win When Traditional Loans Don’t Work

Earlier this year, I found myself answering more questions about owner financing than I had in the past several years combined. It’s not a mainstream option—but in the right situation, it can be a powerful tool for both buyers and sellers. With interest rates still higher than what we saw a couple years ago, and lending tightening up for some buyers, people are exploring creative ways to make homeownership or a sale work. Owner financing is one of them—and it’s worth understanding how it works.

What Is Owner Financing, Anyway?

Also called seller financing, owner financing is exactly what it sounds like: the seller agrees to “be the bank.” Instead of the buyer borrowing money from a traditional lender, the seller provides the financing directly. The buyer makes monthly payments to the seller under agreed-upon terms, secured by a promissory note and recorded with a deed of trust or other legal instrument. This arrangement can be drafted simply by a real estate attorney, and the transaction is still typically handled by a title company to ensure a clear transfer and recording of documents.

Who Might Benefit from Owner Financing?

For Buyers: • Self-employed individuals with good income but limited traditional documentation • Immigrant buyers working with ITINs or still building credit • Buyers with temporary credit issues • Those who want to move quickly or prefer a short-term solution while planning to refinance later For Sellers: • Owners with no mortgage or very low mortgage balance • Those who don’t need all the proceeds right away • Sellers open to steady monthly income and potentially a higher sale price • Investors or retirees looking for income streams rather than a lump sum

Typical Terms – and Why They Vary

Owner financing terms are negotiated between the buyer and seller, which allows for flexibility. Here are some typical ranges we’ve seen:

• Down Payment: 20–50% • Interest Rate: 6–8% (often slightly higher than traditional rates) • Loan Term: Often structured as a 30-year amortization, but with a balloon payment due earlier • Balloon Payments: Could be due in as little as 6 months or as long as 5–10 years • Monthly Payment: Calculated just like a mortgage using an amortization schedule If you’re curious about what payments could look like, I can help you model a scenario or share a sample schedule. ⸻

A Couple of Real-Life Stories

• A couple in Glenwood Springs couldn’t get approved for a mortgage because of self-employment income variability. The seller offered financing for 3 years with a 30-year amortization, giving them time to refinance later—and both parties left the closing table happy. • In New Castle, a seller with no mortgage offered financing to a buyer who had a large down payment but lacked W-2s. The seller now receives $3,000/month in income—more than they would’ve earned from many traditional investments. Legal Simplicity—with the Right Help

This doesn’t need to be complicated or risky. A local real estate attorney can prepare the note, deed of trust, and amortization schedule. The title company still manages closing and recording. I always recommend buyers and sellers have representation to ensure their interests are protected—but the process is very manageable with the right team.

What to Watch For – Tips & Red Flags

• Balloon Payments: These need to be planned for carefully, especially if refinancing depends on future conditions. • Taxes & Insurance: Who pays and how it’s verified should be written into the agreement—escrow can help. • Recording the Deed of Trust: It’s essential the seller protects their interest. • Buyer’s Track Record: Sellers should evaluate the buyer’s ability to make payments, even if banks won’t lend to them. ⸻

Is This Right for You? Let’s Talk.

Owner financing isn’t a fit for every deal—but when it works, it can be a game-changer. If you’re thinking about selling a property and want to explore this option, or if you’re a buyer wondering how you might qualify, I’m happy to talk through real examples and help you understand the risks and rewards.