Just diving into the real estate business and need to know how the process works if the owner carrys back part of the loan? What does that really mean? Thanks for your help
Seller financing means the homeowner is acting as the bank for all or a part of the loan. So instead of you going to, say, Bank of America for a loan to purchase the property, the homeowner and you agree to terms of a loan that he is providing. You then make your monthly payments to the seller, rather than the bank.
Thanks. What if they just take part of the loan? What is the process then?
That means there are two loans to finance the property purchase. Typically a first mortgage with the bank and a second mortgage held by the seller.
Process is to sign a seller financing agreement. It will be a note that the seller holds. They’ll have a second lien on the property. The note will outline the amount of the 2nd lien, rate, term, conditions, etc. Best to have a lawyer look over it unless you already have a good contract.
I know the idea of a seller second sounds like a good way to get a loan through, but lenders still want skin the game. What benefits to a buyer does having a seller second REALLY provide? In other words when would you not be able to get a loan, but if the seller will carry back 20% you can get the loan.
The only benefit I’ve ever seen is in commercial properties. Instead of 20% down they maybe only require 10% down. Or if they want 10% down, now they only require 5% down with a seller second. Are there any other uses then the above example?
I looked into carrying a seller second. It’s actually easier to discount the price 3% as their gift downpayment for a FHA loan. You’d have to discount your note more than 3% to get sell it.