seller financing vs. traditional

I’m considering buying an investment property in Syracuse. I would be using a HELOC for the dowpayment. But for the rest of the price, I’d need to rely on seller financing, or a traditional mortgage from a bank. Is it always safer to go with a traditional mortgage?


I am a little confused. How can one method of financing a property be safer or less safe than another? They should have the same level of risk for the buyer if they are both the same type of mortgage (ie both ARMs or both fixed rate).


I guess what’s always confused me about seller financing is “Why would I trust the person?” Unlike a bank, how do I know the seller will always have the money to finance me? Sorry if this is idiotic. I’m new to this.

Howdy Peanutty:

The seller does not have to have money to finance the sale of a property they own. They are taking a note from you and expecting you to pay them monthly instead of getting cash from the new mortgage that you obtain. The seller should worry that you pay them monthly.

You may have a concern if the seller has an existing mortgage and is collecting from you and then paying the underlying mortgage. I have had it happen where the seller took my money and did not pay the payments. You can avoid this by having an escrow agent collect the money from you and then pay the mortgage company and then send the seller the payment for his equity separately. This type financing is called a wrap around mortgage.

Hope this helps some. LOL