More Buyers

• If you offer owner financing when you list your home for sale, you'll have a larger pool of potential buyers. This may help you find a buyer who is willing to meet your asking price. It will also open the door for buyers who don't qualify for a mortgage from a traditional lender. These borrowers, who usually have a poor credit history, may be willing to pay a higher interest rate, which means additional profit for you as the lender. In many cases, the interest you can charge by financing the home you sell is greater that what you can earn by investing elsewhere.
  
  

Screening Borrowers

• Prior to signing a mortgage agreement, you'll need to personally screen prospective buyers. This involves paying for a credit report and analyzing its contents to determine whether or not the borrower represents an unreasonable risk. In some cases, borrowers may have a single event in their past that prevents them from getting mortgage loans from banks. Others may be young professionals without enough savings for a down payment but a high earning potential. Besides a credit report, you should spend time researching a borrower's identity online or talking with the borrower to judge her character or understand her past. You'll be responsible for selecting a borrower who represents a good risk and can make monthly payments in full and on time.
  
  

Flexibility

• When you finance your home, you'll be able to offer more flexibility in terms of loan terms than commercial lenders can. For example, you may structure the mortgage to include low initial payments and a large, final balloon payment. This will give you steady income followed by a windfall, and may work out better for your borrower as well. If your mortgage is drawn up according to industry standards, you can even sell it to a secondary market and allow someone else to profit from the interest payments while also handing off the risk to the new party.
  
  

Risk

• Most lending and borrowing carries some risk, and financing your own home sale is no different. If the borrower experiences financial hardship, your monthly payments may stop arriving, forcing you to evict and resell the home. If you count on the monthly interest, there's the risk that your borrower will decide to refinance and pay off the mortgage with a loan from a bank, leaving you with a lump sum that is less than what you would have earned in interest over the full life of the loan.