Owner Financing in Texas: Legal and Regulatory Considerations

Owner financing is an attractive option for many Texas home buyers and sellers, allowing transactions to bypass traditional mortgage lenders. However, Texas law imposes strict regulations on owner-financed sales to protect both parties. Understanding these rules is crucial to avoid legal pitfalls.

1. Understanding Texas Usury Laws

Texas usury laws cap interest rates on loans to prevent excessive charges. For owner-financed homes, the interest rate must comply with:

• The Texas Finance Code, which generally limits interest rates to 18% per year for real estate transactions.

• Higher interest rates could be deemed illegal, leading to penalties for the seller.

Tip: Always consult a real estate attorney to ensure your financing terms comply with state laws.

2. Due-on-Sale Clause: What You Need to Know

Many existing mortgages include a due-on-sale clause, which means if the homeowner sells the property (even via owner financing), the lender can demand immediate repayment of the remaining loan balance.

How to Avoid Issues:
✔ Check your current mortgage agreement before offering owner financing.
✔ Obtain lender approval or structure the deal carefully with legal assistance.

3. The SAFE Act and Dodd-Frank Compliance

Federal laws, including the SAFE Act and Dodd-Frank Act, impose strict rules on owner-financed transactions:

• If a seller finances more than one property per year, they must become a licensed mortgage loan originator or hire one.

• Balloon payments and high-risk loan structures may be restricted for non-exempt sellers.

Who Is Exempt?
✔ Homeowners selling their primary residence (one-time seller).
✔ Individuals who offer one owner-financed sale per year.

4. Required Documentation for Owner Financing

To protect both parties, owner-financed transactions in Texas require:
📜 Promissory Note – Outlines loan terms and repayment schedule.
📜 Deed of Trust – Ensures the lender (seller) retains a legal interest until full payment.
📜 Real Estate Contract – Details purchase price, financing terms, and buyer/seller obligations.

💡 Tip: Work with an experienced real estate professional or attorney to draft legal documents correctly.

5. Why Work with The Aida Group?

Navigating Texas's complex owner financing laws can be challenging. At The Aida Group, we specialize in hassle-free real estate solutions for buyers and sellers across Texas.

✔ Compliant Transactions – We ensure all deals follow state and federal laws.
✔ No Middleman – Sell your home directly with flexible financing.
✔ Expert Guidance – Our team helps you structure the best financing terms.

📞 Call us today at (713) 443-6850 or visit ThePropertyAttic.com to explore owner financing opportunities in Texas!