Some may consider seller financing as playing with make-believe money, but it is in fact a creative and effective method for purchasing property without the usual restrictions or requirements of conforming mortgage loans. Seller financing is, in fact, one of the most prevalent tactic to purchasing real estate with less or no down payment.
Seller financing—also called seller-held mortgages, seller hold-backs or seller financing—refers to either a first or second mortgage on the property, that the buyer will owe to the seller. With seller-held mortgages, the seller becomes a "paper" lender.
To assist your understanding of this tactic, Atlas Mortgage has also provided a sample proposal that a buyer would provide to a seller to request seller financing. Click here to view the sample Seller Financing Request & Proposal Letter.
The seller-held mortgage is another creative approach to purchasing property with less or no down payment. It is also helpful for prospective buyers currently unable to obtain a mortgage loan for the purchase. The seller-held mortgage does not really cost the seller any money; in fact, this approach may even lower the seller's capital gain taxes in the long run.
In most cases, seller financing refers to a second mortgage that the seller will hold for the buyer. However, sometimes the seller will finance the entire purchase for the buyer with a seller full financing. Both types of seller financing options will be discussed below.
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