The seller of the house that I want to buy says that he will do a seller held 2nd mortgage. How does that work?
You get a 1st mortgage from a bank for say 80% of the purchase price, and the seller also gives you another mortgage for say another 15%. You only have to come up with the remaining 5%. The percentages can vary greatly case by case. A first or second mortgage means that if things go bad and the lenders have to foreclose, the mortgagor in the first position collects their money first (from proceeds of selling the property at auction), then the second position lender is entitled to collect next.
As in the example, it’s often used as a way to reduce the cash you have to come up with to purchase a property, sometimes down to zero. This increases your leverage.
Same as above. The term used is also called seller carry back. Seller carry back is in the form of a trust deed or mortgae note , depending the state you are in. It should also be recorded.
Typically, this is used only when the buyer does not have the credit score to qualify for a second mortgage with a traditional lender. A score of 580 is typically the minimum required to get 100% financing from a sub-prime lender. If you go much below that, the lender may only lend your 80%, but that same lender may allow a third party (in your case, the seller) to lend you the rest of the 20% if you need 100% financing.
What is it that you are looking to purchase?