What Sellers Should Know About Owner Financing in Texas

 Posted on March 27, 2025 in Real Estate

Owner financing a house in San Antonio can be an attractive option for sellers in certain situations. However, you should fully understand the intricacies of owner financing in Texas and perform your due diligence. An experienced Texas real estate attorney at Geoff Mayfield, Attorney at Law can provide critical guidance to ensure your owner finance transaction is trouble-free.

What Is Owner Financing? 

Owner financing is a real estate transaction in which the home seller offers the buyer a loan to buy the house instead of the purchaser obtaining a mortgage from a bank or lender. In an owner financing transaction, the buyer makes interest payments to the seller over a certain period. The buyer pays the loan until it is paid in full or they refinance.

Owner financing is an attractive option for a seller who wants to earn a higher interest rate and sell the home faster than on the traditional real estate market. That said, there are several points to keep in mind about owner financing your property to ensure a smooth transaction: 

Screen Buyers Carefully

If you are the owner financing your home, you are the bank, so it is your job to make a good loan. Carefully screen all potential buyers by checking their credit reports, verifying income, and calling their references. Thoroughly checking borrowers reduces the chances of a default and a messy, expensive foreclosure.

Set Competitive Rate and Terms

A major owner financing benefit for sellers is that you can often set your rate higher than current mortgage rates. Many owner finance buyers cannot qualify for traditional mortgages, so they may be willing to pay a higher rate. However, Texas usury laws limit the rate you can use, so check current rules. Also, reduce your financial risk by requiring at least a 10 percent or 15 percent down payment.

Use a Deed of Trust

You want to be able to foreclose if the buyer stops paying, so use a deed of trust and a promissory note. Texas has fast non-judicial foreclosures, so you can quickly foreclose on a delinquent buyer.

Know Dodd-Frank and SAFE Act Rules

Federal Dodd-Frank rules restrict balloon payments on owner financing deals and require you to verify that the buyer can afford the loan. Furthermore, the Texas SAFE Act may mandate that a seller have a mortgage loan originator license if they finance more than five homes annually.

Approaching an owner finance transaction with caution and preparation can ensure the deal works for both sides. You should always verify your owner finance contract terms with a seasoned Texas real estate attorney.

Contact Our Bexar County Real Estate Attorney

Owner financing is a popular investment strategy for many Texas sellers, but you must tread carefully to ensure the transaction is profitable and legal. At Geoff Mayfield, Attorney at Law, our San Antonio, TX real estate lawyer can provide legal guidance on all aspects of owner financing and ensure compliance with state and federal laws. Call 210-535-0870 today to schedule a free consultation and get legal help with your owner financing transaction.