Owner financing,
every state, demystified.

Owner financing — sometimes called seller financing — is a real-estate transaction in which the seller acts as the bank. Instead of the buyer borrowing from a third-party lender, the buyer makes a down payment to the seller and signs a promissory note for the balance, paying the seller in installments over a fixed term.

There are three common structures. A contract for deed (also called land contract or installment land contract) keeps legal title with the seller until the contract is paid in full. A wraparound mortgage (often called a wrap or AITD — all-inclusive trust deed) transfers title at closing, with the buyer paying the seller, who continues paying any underlying mortgage. A purchase-money mortgage transfers title and creates a new mortgage from buyer to seller.

The right structure depends on state law, the existence of any underlying mortgage, the parcel type (vacant land, residential, commercial), and whether the buyer plans to occupy the property. The wrong structure can create due-on-sale clause problems, expose the seller to unintended foreclosure proceedings, or leave the buyer without recorded title.

Conventional lenders avoid certain transactions. Vacant land rarely qualifies for traditional financing. Manufactured homes on land are difficult to finance through conforming products. Self-employed buyers, ITIN borrowers, and credit-rebuilding workers face strict underwriting that doesn't fit their reality. Owner financing exists because the conventional system leaves real, qualified buyers behind.

From the seller's perspective, owner financing can convert a slow-moving listing into a sale, generate interest income that beats most fixed-income alternatives, and spread capital gains over the term of the contract for tax-deferral purposes. For investors, it's a way to monetize equity without losing it.

From the buyer's perspective, it's often the only path to ownership for properties or borrower profiles that the conventional system won't underwrite. Done right — with statutory disclosures, recording, and clear remedies — it transfers equitable title from day one and creates a path to legal title at payoff.

Contract for deed: the seller retains legal title until the buyer pays in full. The buyer takes possession and gets equitable title. Recording requirements vary by state — some statutes (Minnesota, Ohio, North Carolina) require recording within a fixed window with mandatory disclosures and cure periods.

Wraparound mortgage: the buyer takes legal title at closing, signs a new note to the seller for the full purchase price (less down payment), and the seller continues making payments on the underlying mortgage. The buyer's payments to the seller include both the seller's profit margin and the underlying-mortgage debt service. Wraps trigger due-on-sale-clause considerations under the Garn-St. Germain Act.

Purchase-money mortgage: the buyer takes legal title at closing and signs a new note and mortgage to the seller for the unpaid balance. This is the simplest structure when no underlying mortgage exists, and the closest analog to a conventional bank-financed sale.

Buyer protections: a recorded contract or memorandum that puts the buyer's interest in the chain of title; a clear cure period for late payments; statutory disclosures about senior liens, balloon-payment dates, and total interest paid; and — in many states — equitable-mortgage doctrine that prevents forfeiture of substantial buyer equity without judicial process.

Seller protections: a meaningful down payment that secures the seller's exposure; a fast forfeiture remedy under state statute (Arizona's graduated cure schedule, Minnesota's 60-day cancellation, Texas's executory-contract framework) where buyer equity is minimal; insurance and tax escrow requirements; and acceleration clauses that let the seller demand the full balance on default.

The exact balance shifts state by state. Some states (California, North Carolina, Oklahoma) treat installment contracts as equitable mortgages once the buyer has paid significant equity, requiring judicial foreclosure. Others (Arizona, Minnesota) preserve a streamlined non-judicial forfeiture remedy for the seller. Picking the wrong structure for your state is the single biggest mistake operators make.

Every state caps the maximum interest rate a lender can charge. Owner-financed transactions are subject to these caps, but most states carve out an exemption for seller-carryback financing on a personal residence the seller previously occupied. The specifics vary widely.

California's constitutional usury limit is 10% for personal/family loans, with seller-carryback exemptions. Arkansas constitutionally caps consumer loans at 17%. Texas has no functional cap on rates negotiated in writing for most owner-finance deals. Federal law (the SAFE Act and the Dodd-Frank Loan Originator rules) imposes additional requirements when the financed property is a residential dwelling and the seller transacts more than a small number of deals per year.

If you're a seller running owner-finance volume — even three or four deals a year on residential property — you likely need a Residential Mortgage Loan Originator (RMLO) license or a licensed RMLO to originate the loan on your behalf. This is a hard line; non-compliance can void the contract and expose the seller to penalties.

Recording puts the buyer's interest in the public chain of title, protecting against subsequent buyers, judgment creditors, and senior lien holders who could otherwise take priority. Whether recording is required varies by state — Texas, Oklahoma, Minnesota, and Ohio impose statutory recording requirements; Pennsylvania, Arizona, and California permit but don't mandate it.

Even where not statutorily required, recording is almost always the right call. Most states accept either the full contract or a memorandum of land contract — a short document referencing the parties, the parcel, and the existence of the contract without disclosing the financial terms. Memoranda are preferred because they avoid disclosing private deal economics to the public record.

Recording fees vary by county and by document length. Budget $30-$200 per county, plus any state-specific transfer taxes or homeownership-fund surcharges (California's SB 2 fee adds $75 to most documents).

Default remedies fall on a spectrum from non-judicial forfeiture (seller cancels the contract, retains payments, takes back possession — fast, statute-driven) to judicial foreclosure (court-supervised process to sell the property and apply proceeds to the debt — slow, expensive, but protective of buyer equity).

States with strong forfeiture statutes — Arizona (ARS 33-741), Minnesota (Minn Stat 559.21), Iowa (Code 656), Oregon (ORS 93.905) — give sellers a fast, cost-effective remedy when buyer equity is minimal. States like California, North Carolina, and Maryland push contracts toward equitable-mortgage treatment, requiring judicial process when significant buyer equity has accumulated.

Most well-drafted contracts include a notice-and-cure provision (typically 30-60 days), an acceleration clause, and a liquidated-damages provision. The cure period is the buyer's protection; acceleration is the seller's leverage; liquidated damages are the negotiated middle ground when neither side wants to fight in court.

Pick your state below for the statute citation, the recording rules, the default remedy, and where in your state these deals actually happen. If you're looking at a specific city, the city pages cover neighborhood-level market notes — where FSBO inventory clusters, deal sizes, and the local property types that move on owner financing.

Once you've read the legal context, send the deal to us. We've structured contracts in dozens of states and have the documents, attorneys, and statutory checklists to keep both sides protected.