There are two ways you can structure an owner finance deal with a mortgage or with a contract for deed.

The most common way is with a mortgage and a promissory note this is what you think of when you get a loan through the bank. In an owner finance arrangement with a mortgage the seller is acting as the bank and the buyer must repay the loan with is secured by the property. If the deal is structured with a mortgage and promissory note, the buyer has the title to the property at the beginning of the deal as soon as the paperwork is signed. If the buyer defaults on payments, the seller must foreclose to get the property back.

The second way is with a contract for deed. If the deal is structured this way, the buyer does not possess the title to the property until all payments are made. Until all the payments are made the title is held in escrow. If the buyer defaults on payments, the seller can get the property back without foreclosing. Contract for deed is also called a land contract and is not legal in all states.