S.A.F.E. Act Seller Financing in Texas

[Bret Blackburn]

I have a lady interested in an investment property that I have recently bought. She would like to buy with me owner financing the deal. I apologize and know this has been discussed before, but I didn't find a clear enough answer. Being this isn't my homestead and she isn't a family member, am I prohibited from carrying the note on this property for her. It would be a 5 yr amortized note. Im in Texas. Thank you any clarification

[Andrew Postell]

@Bret Blackburn exceptions are written into the Dodd-Frank act to accommodate owner financed transactions. Essentially, if you finance 3 or fewer properties in a 12-month period you will be exempt from these rules WITH THE EXCEPTION OF...balloon payments. Those would be a no-no if you finance 3 or fewer. I saw you mentioned amortized in 5 years.  That would make a payment extremely high each month so did you mean balloon?  In either case, here's the specific rules concerning this:

If you finance a single property in a 12-month period then you CAN have a balloon payment if the following can apply:

1. The seller must be a natural person and can only finance the sale of a single property in any 12-month period. The property must have been owned by the seller and must serve as security for the loan. For the single-property exclusion, the seller may only be an individual, trust or estate. Corporations, LLC's, partnerships or other seller entities do not qualify for the one-property exclusion.

1. The seller did not construct, or act as a contractor in the construction of, the residence in the ordinary course of the person’s business.

The terms of the loan offered must meet the following requirements:

• First, the financing must have a repayment schedule that does not result in negative amortization. Note that this condition does not require the loan to be fully amortizing, meaning that a balloon payment can be a component of a one-property exclusion loan.

• Second, the loan must have a fixed interest rate or an adjustable interest rate that remains fixed for at least five years.

*WHEW* That's a lot of information. But I at least hope this helps. If it does, please vote for my post. Thanks so much! @Natalie Schanne just wanted to tag you too in case this helps.