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There are times when we need to purchase items and we simply do not have all of the financing we need. A viable way to obtain these funds is through Vendor financing. To a few, conventional financing is just not an option. When regular financing is not available Vendor financing is there. You may want to purchase a Home and not have the credit to obtain financing through the regular methods. This is where Vendor financing or Seller financing comes into play. This Seller financing avenue is also readily available for other purchases.
The key difference between Vendor Finance and Seller/Owner Finance is that Vendor Finance has no debt attached to the asset being sold to the purchaser, where Seller/Owner Finance has a debt attached to the asset.
Most people are familiar with Vendor Financed Homes, the average person recognizes Vendor financing as Rent to Own but it is a little more than that, with Vendor financing you actually make a legally binding agreement to purchase. With Rent to Own you can buy if you chose but you are not legally bound to purchase. Thinking of Rent to Own as Vendor financing simplifies it a bit. There is a growing market for Vendor financing in the Housing market. People who thought there was no way they could possibly get a home have found help through Vendor financing.
To explain Vendor financing a little further, the Vendor is anyone selling anything. With Vendor financed contracts you are simply buying what the Vendor has on a time payment plan. You are merely paying a weekly or monthly payment or whatever agreement you have made and the seller has become your landlord. You obtain a form of possession by generally giving the Vendor or seller a down payment and a promise to make regular installments. This form of purchase is generally no different from any other mortgage but the interest rate on your purchase is higher.
Being in debt at any point can be a little uncomfortable and understandably the interest rates are a little higher but if you are trying to purchase a home and have exhausted all other options Vendor financing is worth a try. Of course the risk factor decides the amount loaned and the rates that go with that loan but Financing is changing and Vendor financing is becoming ever more popular when purchasing a home.
With Vendor financing credit may be easier to acquire and there is more flexibility in the arrangements since there is that one on one association with the Vendor or Seller. With Vendor financing documentation is not as restricted. The lending process may be faster as well. Remember, the Seller is the one you are paying.
You and the Vendor must come to an agreement on the rate of interest placed on the loan the amount of the loan payment, the length of the loan and any other contractual items that may be important to the agreement. The Vendor may require collateral; this may be some property you own or the property you are purchasing from the Vendor. It is possible the Vendor may want a considerable down payment depending upon the risk involved.
Keep in mind until you have covered your financial obligation in full although you may be living in your home it is not yours until you have paid every penny. It is extremely important that you have your lawyer look at any major purchase agreement you may be involved in. You do not want any costly misunderstandings in the future.
If you should decide to use Seller or Vendor financing for your purchase do not just pay the regular payments. Try to double your payments or pay whatever extra you can. Only paying the minimum may seem easy but it will cost you in the end. When purchasing a home it is possible for property value to take a down turn rather than an increase in value. With vendor finance you will still be in the high end interest rate district so consider all of your options and make plans for any unforeseen emergencies that may occur before making any legal obligations. In purchasing your home we want the transaction to be a good one.