Seller Financing Can Be an Option for Some Home Buyers and Sellers

With some people not being able to qualify for lender financing these days due to financial difficulties in the past or a low down payment - BUT, who now have a good income track record but STILL don't qualify, there's an old option that might just work.

When the home you want does not have a mortgage or has one the seller is willing to carry, seller financing can be a great deal for a person buying a home.  Usually, the seller will want 10% down, but not always. The interest rate charged could be a point above the lowest bank rate. But one big advantage: The seller usually doesn’t require mortgage insurance, meaning the monthly payment will be lower in any case.

The loan can be constructed on a 30-year basis. Most seller-finance deals, however, last for 5 to 7 years, then are settled with a balloon payment for the balance.

Sometimes, a buyer who opts for seller financing will be in a better position 5 or 7 years down the road and will then be able to qualify for a 30-year conventional mortgage.

When buying a seller-financed property, be sure to get a current appraisal. Get title insurance for a few hundred dollars - it will show any tax liens and any other claims that could affect a property transfer. And, of course, consult your local Realtor! Sellers need to protect themselves and so do the buyers. Proper documentation and guidance is highly recommended to avoid possible future lawsuits. Disclose and protect.

Also, as a matter of information, in our changing economy, some lenders are changing their lending practices, too. I ran into a loan agent from Wells Fargo yesterday at our Thursday Pasadena Foothills Association of Realtors meeting, and he pointed out to me that Wells Fargo has an FHA loan available for people with a credit score as low as 500. I wonder how many other lenders will follow suit!