What is the difference between an owner-financed loan and a conventional loan?

An owner-financed loan and a conventional loan are both types of real estate financing used in Texas. However, they have some key differences. An owner-financed loan is an agreement between a seller and a buyer where the seller provides financing for the purchase. The buyer makes payments directly to the seller and the terms of the loan are negotiated between the two parties. In some cases, the buyer may make a down payment and finance the remainder of the purchase price. The seller, as the lender, holds the title to the property until the loan is paid off. A conventional loan is one that is provided by a financial institution such as a bank or mortgage company. The buyer applies for the loan and the lender reviews the application. If approved, the lender provides the financing for the purchase and holds the title to the property until the loan is paid off. The primary differences between an owner-financed loan and a conventional loan are who the lender is and the process for obtaining the loan. With an owner-financed loan, the buyer makes payments directly to the seller, whereas with a conventional loan, the lender holds the title and the buyer makes payments to the lender. The process for obtaining a conventional loan is also more heavily regulated and requires additional paperwork and steps.

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What is the difference between an owner-financed loan and a conventional loan?

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