Learn How To Buy Your Dream Home! ☺ No Banks, Huge Down-Payments or Restrictive Credit Requirements!
In seller financing, the seller takes on the role of the lender. Instead of giving cash to the buyer, the seller extends enough credit to the buyer for the purchase price of the home, minus any down payment. The buyer and seller sign a promissory note (which contains the terms of the loan). They record a mortgage (or "deed of trust" in some states) with the local public records authority. Then the buyer pays back the loan over time, typically with interest.
These loans can be long term or short term -- for example, amortized over 30 years or amortized over 30 years but with a balloon payment due in five or ten years. The theory is that, within a few years, the home will have gained enough in value or the buyers' financial situation will have improved enough that they can refinance with a traditional lender.
From the seller's standpoint, the short time period is more practical -- sellers can't count on having the same life expectancy as a mortgage lending institution, nor the patience to wait around for 30 years until the loan is paid off. In addition, sellers don't want to be exposed to the risks of extending credit longer than necessary.
A seller is in the best position to offer a seller financing deal when the home is free and clear of a mortgage -- that is, when the seller's own mortgage is paid off or can, at least, be paid off using the buyer's down payment. If the seller still has a sizable mortgage on the property, the seller's existing lender must agree to the transaction. In a tight credit market, risk-averse lenders are rarely willing to take on that extra risk.
Sound complicated? Well it can be but WE can simplify the process by explaining what options you may have and even actually help you find your dream home! If you'd like more information, fill out this simple form and we will get started helping you and your family Owner Finance Today!
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