Seller Financing

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Mortgage Dictionary -> Seller Financing

The housing bubble has unfortunately burst in the United States, making selling a house very difficult. So as a seller in this buyers-market, what can you do to move your property? Well, there are many options out there, but one of the most popular ones right now is that of seller financing. If you've never heard of that term (and most haven't), you're going to learn a lot about it in this article.

What is Seller Financing?

Seller financing occurs when the seller attempts to help the buyer with financing the property. This can happen in one or two ways. The first way of doing this is by taking a second note on the existing mortgage (if the seller has not paid it off yet). The second way of doing this is by financing the entire purchase.

Why Do Sellers Finance?

Qualifying for a mortgage can be very, very difficult. Sometimes it is so difficult that someone who would be a good buyer for a home is unable to get a mortgage. In this case, the seller steps in and finances the house for the buyer, thereby allowing the buyer to buy the home and take it off the seller's hand. Usually, seller financing only happens when the buyer cannot get financing otherwise.

What Should Sellers Think About When Considering Seller Financing?

Can I Really Afford It? Anytime seller financing occurs, it is usually with a buyer that has less than perfect credit. What you need to ask yourself is if you think the buyer has enough credit worthiness to receive this form of financing. In other words, how likely do you think it is that the buyer will default on the loan and leave you hanging? If you think it's likely, then it's a good idea to back off from the idea.

Do I Need to Sell This Urgently? Many sellers finance so that they can sell the house quickly. For some, selling the house quickly is essential, but for others, it's alright to wait for the right buyer to come along. Seller financing is considered a last resort, so if you can hold out for a buyer with conventional financing, that's probably best.