Buying A Home – Will Seller Financing Work For You?

Statistics show approximately 10% of all home sales involve some kind of seller financing. One significant advantage to this type of financing is the flexibility of terms. However, finding a seller willing to consider this option may take some effort. Keep on the lookout for sellers facing huge capital gains tax; have difficulty finding a qualified buyer; willing to receive income over time with interest; or willing to raise the price to help of financing.

In real estate terminology, seller carry-back happens when the seller is open to selling you their home in monthly installments. Once your sale is complete, the seller will transfer title over to you in return for a promissory note obligating you to a home loan paid via monthly installments. The promissory note will set up a lien on the home favoring the seller until you cure the loan. Seller financed transactions can include a balloon payment due within a few years. After this occurs, you’ll probably prefer to take out a new loan or move. The perfect seller to find is one who owns the property free and clear since they aren’t obligated to pay off a home loan after the sale.

In circumstances where your combined down payment and mortgage loan isn’t enough to reach the sales price, you can use seller financing to cover the difference needed to qualify. This alternative can also save you money since interest rates will be lower than conventional secondary financing.

If you want to utilize this option, you’ll need to assemble detailed information about your income, credit, work history, and references prior to approaching a seller. Unlike traditional financing, you’ll get more flexibility with a seller. Some possible options you may discuss may include:

1) Lower interest rate

2) Low starting payments

3) Buying down the mortgage loan rate

4) No prepayment penalty

5) Delaying the balloon payment for at least five years or negotiating the right to prolong the home loan if your situation makes it hard to be approved for a new loan or if you can’t pay off the balloon payment in full.

6) The option to have a qualified homebuyer take over the second mortgage if you decide to move out of the property.

In a perfect world, you would incorporate all these terms into your purchase contract; however you’ll probably have a difficult time locating a seller willing to give you these concessions. Decide which terms are vital to make the deal work for you and forgo the remaining terms you can live without.

Are you searching for the best deal on Orange homes for sale? Come and see competent Orange realtors who can help you find your dream home.