Owner Financing Definition

Owner financing describes the situation where a buyer finances a purchase directly through the seller. For example, a person desires to purchase a house but is unable to qualify for a conventional mortgage; the seller agrees to finance the loan in order to sell the house. In many situations, only a portion of the sell price (for example, often the down-payment amount) is financed by the seller with the remainder of the purchase price being financed through a bank loan. In addition, many owner financing sells have various peculiar terms to suit individual needs-for this reason, owner financing is often referred to as "creative" financing. Owner financing, if poorly or improperly utilized, can potentially expose both the seller and the buyer to great risk.