How to buy property when you can’t get a bank loan

Alternative methods and means to purchase a home when bank financing isn’t available.

Back porch of home for sale in live oak fl


You want to purchase a home, or property (Doesn’t necessarily have to have a home on it) but bank financing isn’t an option for you for one of several different reasons.


  1. Owner Financing. In an owner financing situation, the seller of the property effectively becomes the bank for you. You negotiate and come to agreement on terms for the loans (Your amount of down payment, your percentage rate for interest, and the term length of your mortgage).  Things to be aware of when considering owner financing are the interest rates will be significantly higher than those advertised by a bank.  7-8 percent is probably the most common rate I see.  Also, the seller will require a fairly substantial down payment. Typically, $10,000+ as the seller will have thousands of dollars of costs to transfer the property. They need to have those costs covered, factor in the worst case scenario of having to complete a foreclosure if you don’t pay, and still put a few bucks in their pocket.  Because the seller is holding the mortgage on the property, you’ll actually get title to the land and the deed will be in your name, but the mortgage will be a lien held against it until you’ve paid it off in full.
  2. Private money from a 3rd  party. In this scenario there is an individual or bank-like entity with the money and assets to loan you the money personally. The situation is very similar to the above described owner financing option, with the difference being that the owner financing typically has the seller’s desire to sell the property working in your favor to make terms that will be agreeable and suitable to you. They want the property sold, and will in most cases be flexible to make that happen. Private money lenders on the other hand are basically looking for terms that have very little risk for them with good rate of return.  Normally this is achieved with a larger down payment, and higher interest rates. Private money interest rates are typically seen between 6% and 10%.
  3. Lease purchase option. With a lease option, you pay the seller a negotiated and agreed upon amount of money to effectively take the property off the market for a determined time frame. Typically 6 months to a year. During that time frame, you also pay a monthly rent to the seller to occupy the property as you have a lease that runs parallel with that time frame.  If the option term expires without you purchasing the property in most cases (unless it’s negotiated otherwise) you will need to vacate the property, you will forfeit your option payment, and the seller will be able to go ahead and offer the property for sale again to someone else.
  4. Reputable credit repair processes from places like Credit Law Center can be helpful in certain instances.  This is not an instant fix however, and time will be needed to dispute and correct items on your credit as well as allow for the credit bureaus to update. You can also open “secured” lines of credit such as a “secured credit card” through your bank to establish a payment history.  This will help (re)build your credit as well.

Things you’re thinking could work, but probably won’t:


  1. Rent-to-own. You probably envision the ability to rent from a seller and have a portion of the payment apply towards the purchase of it over time. The problem with this is as I mentioned above, Sellers have a relatively high expense when transferring title of a property.  Most all sellers are unwilling to take that upfront financial burden on themselves without having it being covered by the prospective buyer. Sellers need a substantial down payment for it to make financial sense for them, and once you add that, you’re back at recommendation #1: Owner Financing.
  2. Assumption of the seller’s mortgage. Unfortunately, mortgage assumptions just don’t really happen these days. The lenders that hold those mortgages will qualify buyers with the exact same process as they would for getting a new loan from scratch. I get asked about mortgage assumptions quite regularly, but I’ve yet to see one happen since I’ve been in the real-estate business.


That about wraps up the other options you have available for making a purchase without a bank, or having the cash saved up to pay for it entirely at once. Owner financing properties and homes are out there. If that sounds like an option for you, give us a call or shoot us an email and let us see what we can find that suits your interests and tastes. You can also browse our selection of Owner Finance Homes in North FL for Sale

Billy Golightly