Does Owner Financing Affect Credit

Does Owner Financing Affect Credit

Does Owner Financing Affect Credit

Does Owner Financing Affect Credit

When you’re starting to invest in real estate, there are many ways that you can get creative about purchasing your investment property without taking out a large loan or using all the cash you have on hand. One of our favorite investing tools is owner financing. But that begs the question does owner financing affect credit?

You may be asking why a property owner would want to finance the home they’re attempting to sell, and that’s a great question! One of the reasons an owner might agree to fund the sale is because they owe no money on the property. Whether they’ve already paid the home off or the property was inherited, owner financing on a home that is owned outright can be a win-win, especially in challenging markets.

But, before you approach an owner with the option, it’s a good idea to learn everything you can about owner financing, including one of the most burning questions: does owner financing affect credit?


 So, Does Owner Financing Affect Credit?


To invest in real estate, you have to be willing to take some risks. Sometimes that means leveraging your credit to purchase your home without using your resources, like your IRA, savings, or other investments. But when it comes to owner financing, it does not typically impact your credit.

When you approach a seller with the idea of owner financing, one of the top questions you’re likely to get is, “Does owner financing affect credit?” And, just like for you as the buyer, the answer is typically not.

Usually, owner financing is not reported to credit companies.

So what happens if a buyer defaults on their payments? First, the purchaser would lose all the money they put into the home. Then we, as investors, would have a chance to find another buyer that would fit inside of our agreed-upon term, ask to extend our term, or the owner would get the house back. That said, every circumstance is different, and every contract is different. 

Not having the purchase of an owner-financed home can be both good and bad. If the purchase goes badly and the buyer defaults, it’s good for them—their credit won’t receive a derogatory mark. On the other hand, an owner-financed home that goes well also won’t go on their credit report and boost their rating.

As with everything, there are pros and cons to owner financing. We love owner financing because it’s a great way to invest in real estate for a great price and without jumping through all the hoops that lenders require. It’s also a great option for people who have poor credit or are self-employed and find it difficult to buy a home.

If you want to know more about owner financing and all of its nuances, take a look at the video below and all our other videos on our YouTube Channel.

How Credit Impacts Your Purchase Power


If you’re not purchasing a home for yourself or investing in real estate because you have poor credit, you’re not alone. Credit issues are often the biggest reason why people aren’t investing in real estate. Many people believe that buying a home is directly linked to how good or bad their credit is. However, credit doesn’t have to have a bearing on your purchase power.

Right now, creative financing solutions are one of the best ways to get into the real estate market.

Some of these creative financing solutions include a lease purchase or owner financing. With these buying options, your credit usually isn’t taken into account!

That is good news for you if your credit history is a problem.

One of our favorite ways to purchase a home is through owner financing. This is when the owner of the house agrees to allow us (via our buyer) to make payments on the home in the way a buyer would typically make payments to a lender.

At this point, you may be asking yourself, “Why would a homeowner agree to finance a purchase?”

Well, there are a few reasons. The most common is that the home is already paid for, and they don’t need the money from the sale for anything. Right now, approximately one-third of homes in the United States are owned outright. That means there is a large market of people who might be willing to finance the home you want!

What to Consider Regarding Owner Financing Affecting Your Credit


  • Usually, owner financing is not reported to credit companies
  • When a buyer defaults on payments and we are unable to find a new buyer or extend the terms of our lease, the owner would get the house back and the purchaser would lose all the money they put into the home
  • If you’re worried about your credit affecting a home purchase, creative financing (like owner financing) is a great solution.


If you find yourself still asking ‘does owner financing affect credit?‘, discover everything you need to know with our FREE eBook.

Don’t forget! Get your free copy of our Real Estate Investor’s Blueprint. Just fill out the form to the right and we’ll email you our step-by-step guide to getting into investing and owning more homes without using your cash or credit.