How to buy a property without a bank

How to Buy a Home… Without a Bank.


WITH CREDIT MARKETS tight, home owners and their buyers are now bringing back seller financing. These deals were most popular in the 1980s when mortgage rates hit double digits, the seller and the buyer agree to a mortgage schedule with no banks involved. For some buyers and sellers this is their only options.

Here’s what you need to know.


Steve Vennemann


BoardWalk Premier Realty INC


Down payment: In today’s market many banks have returned to asking for 20 percent down; offer less and you’ll probably have to pay private mortgage insurance which adds up to half a percentage point to the loan. In seller financing, the buyer can put down less than 20 percent — without the PMI The buyer needs to have money in the deal- the more, the better.” Homeowners will typically want a down payment of at least 10 percent as protection against default.

Interest rates: Most private sellers charge slightly above market rates since they’re shouldering more risk — particularly if their would-be buyer got rejected for a bank loan. But with home prices still in the tank, some owners are offering lower rates to buyers who agree to meet their price. And keep in mind: Most seller-financed deals expire in five to seven years — 15 at the most — and finish out with a balloon payment.

Due diligence: When there’s no bank involved title insurance becomes even more important. Usually available for a few hundred bucks, it digs up tax liens and other claims that could affect a property transfer. A current appraisal, credit report and background check are also smart moves. After all, there’s no institution behind this deal — it’s just you and the other guy.


Buying a house with owner financing has less closing costs.

No PMI insurance.