Should You Go With Seller Financing?

When it comes to financing a home, the options are surprisingly large. In this article, we take a look at whether you should consider going with seller financing.

Seller financing is one of the more unique methods for financing a home purchase. As the name suggests, the seller of the home offers to give you a loan to make the purchase on the home. The loan is usually represented as part of the purchase price. If the seller offers to finance thirty percent of the purchase price, you need only get a 70 percent loan from a traditional lender. The seller’s loan is usually recorded as secondary to the primary lender loan.

Seller financing may sound like a slam dunk option to take advantage of, but is it? The answer depends on whether certain factors are present. Let’s take a closer look.

A seller offering financing may be a sign of a problem with the home. Almost all homes have small problems, but those with big, expensive problems should be avoided like the plague. A seller offering a lot of financing on good terms may be indicative of a big problem with the home since most lenders will refuse to provide financing on such a home. Make sure you get a thorough home inspection before biting on such an offer.

Seller financing often comes with a hidden cost that you is right in front of your face, but you might not realize it. The cost is in the increased sales price of the home. The seller may have over-improved the home and can’t sell it at fair market value. They will try to hide this fact by offering financing. More than a few buyers will consider this a good deal and forget to evaluate whether the overall price of the home is reasonable.

Seller financing has its place in the real estate market. The idea is to make sure that it is not hiding some issue with the home. If the house is in good condition, the price is fair and the terms of the financing are reasonable, seller financing may make sense.

Learn more about mortgage loans.
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