30 yr Owner Finance, or Conventional/FHA mortgage option?

[Joe Gee]

So I have a dilemma.  I'm just put a house under contract that I plan on occupying as my primary residence.  While I was at the meeting with the seller, he asks if he can finance the deal.  He says he basically doesn't need the money, he owns it free and clear, and the terms would be 30 yrs fully amortized, at 5% interest, 10% down, no pre-payment penalty.  My original plan was to buy with a conventional loan with 15% down.  If I could get away with putting 10% down that would be better.  

The seller and I agreed that we would think it over and get back in a couple of days.  

I called my mortgage broker and he doesn't like the idea of owner finance cause there are many if's and but's. Primarily, what if the owner dies? I didn't think about that. I'm sure there is a back up plan to that. He says he can get me in FHA, 3.5-5% down, but I would need to do some repairs first.

So I guess my question is, is a 30 yr owner finance deal something that I should be worried about?  Can anything go wrong with something this long?  It's pretty hard to pass up those terms.  Especially since the underwriting won't be as stringent, and it won't take very long to close.  

Thanks

[Jon Holdman]

Of course your mortgage broker doesn't like this idea.  Its kind of like negotiating with a car salesman for a car on his lot, then saying "I think I'll buy a car one from someone else".

Use a servicing company to give you good tracking that the payments are being made.  Its possible the seller could take your payments then deny they've been received.  I can't say how likely that is.   First house I ever bought was with a 15 year, fully amortized seller carried loan and it went off without a hitch.  

Loans, for the lender, are assets, just like a bag of money.  If he dies, the loan will transfer to his heirs.  Not really any different than the fact that the loan you get through that broker will almost certainly change hands multiple times.  Speak with your attorney to be sure everything's on the up and up.