What is seller financing?
Sometimes the seller is willing to finance the purchase of their property. The buyer negotiates a note with the seller and then makes a monthly payment to the seller, the seller then passes that payment on to the mortgage company. If the seller is no longer making a mortgage payment on the property, he/she simply accepts the down payment and monthly payments from the buyer. The seller becomes the lender.
Sometimes the seller is willing to finance the purchase of their property. The buyer negotiates a note with the seller and then makes a monthly payment to the seller, the seller then passes that payment on to the mortgage company. If the seller is no longer making a mortgage payment on the property, he/she simply accepts the down payment and monthly payments from the buyer. The seller becomes the lender.
Seller financing is when a seller helps to finance a real estate transaction by taking back a second note or even financing the entire purchase if the seller owns the home free and clear. Usually sellers do this when a buyer has difficulty qualifying for a conventional loan or meeting the purchase price. Seller financing differs from a traditional loan because the seller does not give the buyer cash to complete the purchase, as does a lender. Instead, it involves extending a credit against the purchase price of the home while the buyer executes a promissory note and trust deed in the seller’s favor. These special circumstances must be acceptable to the lender who makes the first mortgage on the property. The necessary paperwork is prepared by the title or escrow company after the terms are worked out between the buyer and seller. If you are a seller considering such an arrangement, it is critical to thoroughly evaluate the creditworthiness of the buyer first. Fear of default makes many
