Non-Qualifying Assumption       Qualifying Assumption

The special financing options above have terms that can be very simple or very complex.  The complexities of the terms are determined on the knowledge and/or creativity of the buyer, seller and/or the real estate professionals involved. 

Please note, most terms are negotiable, however the seller typically already has terms they would consider.  Because of this, the buyer should ask the seller what they are willing to consider upfront.  If the seller is not sure, the buyer should write an offer based on terms that work best for themselves but should expect a counter offer from the seller. 

Owner/Seller Financing:

This is when the seller acts as the bank and finances the difference between the agreed sales price and the down payment.  Please note, most sellers expect to receive at least 10% of agreed sales price as a down payment in order to pay any/all closing costs and at least 1 to 2 % above the going interest rate as the interest rate for the loan.  The length of the loan is generally 15 to 30 years with a balloon or pay off within 5 to 10 years.  The benefit to the seller is usually less closing costs, a quicker close and more money.  The benefit to the buyer is a quicker close, little to no qualifying for the loan, and less closing costs.

Non-Qualifying Assumption:

This is when the buyer assumes the sellers mortgage and pays the difference between the agreed sales price and the seller's mortgage balance to the seller at closing.  Please note, although there is no qualifying required by the bank, the seller sometimes requests a credit report, financial statement, etc. from the buyer.   Also, a true non-qualifying assumption loan had to commence on or before December 1989 which means that as years go by, it will become harder to find these types of loans. The benefit to the seller is usually less closing costs, a quicker close and more money.  The benefit to the buyer is a quicker close, little to no qualifying for the loan, and less closing costs.

Qualifying Assumption:

This is the same as non-qualifying assumptions; however the buyer must qualify with the seller’s mortgage company (bank) to assume the seller's mortgage balance.  The qualifying requirements differ from bank to bank but usually will follow similar guidelines as with traditional financing.  The benefit to the seller is usually less closing costs and more money.  The benefit to the buyer is less closing costs and better terms, like lower interest rates and/or less years left on the note.

Lease Option/Purchase:

This is like a lease with terms that can be long or short including late fees but with an addendum or sales contract giving the buyer an option to purchase the property anytime up until the end of the lease for an agreed sales price at the beginning of the lease.  The buyer usually pays the current monthly mortgage payment directly to the mortgage company and pays the difference between the agreed sales price and the mortgage balance at the beginning of the lease to the seller.  In cases where the buyer does not have enough money for the down payment, the owner can carry a second lien, defer the difference until actual closing or ask for an option fee.  This down payment or option fee is usually non-refundable unless buyer buys the property within the lease term.  If the buyer pays the entire down payment upfront, the buyer usually only has to pay off or finance the remaining balance at the actual time of closing.  The benefit to the seller is less closing costs, a quicker close and more money.  The benefit to the buyer is less closing costs, a quicker close and little to no qualifying by the seller.  Generally, the buyer takes the tax deductions at the end of the year if and only if the buyer makes all monthly payments to the mortgage company and/or the owner on time.  more about lease option/purchase...

The above information is an outline of the different options of special financing that you may use to buy or sell a property.  There are more details that should be addressed before pursuing any of these types of options with The Premiere Team.