3 Seller Financing Options

In an effort to sell their homes faster and easier in this faltering economy and strict lending environment, many home sellers are offering buyers seller financing. This is where the seller holds the mortgage on the property and the buyer pays the seller a monthly mortgage payment with interest. In essence, the seller acts similar to the bank or lending institution. It's helping more and more buyers and sellers to come together to combat what has proven to be a tough market.

If this interests you as a buyer or a seller, here are three financing options to choose from.

1. All-inclusive
The all-inclusive option permits the buyer to buy the home with as little money out of pocket as possible. The seller may or may not require a cash down payment from the buyer, but whatever the arrangement, the seller holds a promissory note on the property for the entire mortgage amount (less any down payment made by the buyer).

2. Second or junior mortgage
Another option for overcoming the strict lending guidelines of typical mortgage lenders is for the seller to hold a second or junior mortgage for the amount that a buyer would normally put as a down payment (approximately 20% of the purchase price). This bridges the gap in what the lender will loan on the property and the purchase price of the property. While there is a risk to the seller for any seller financing option, this option is a bit riskier because the seller is at a lower priority to be paid if the buyer defaults for any reason. The advantage to this type of seller financing is you receive the funds paid for by the first mortgage at the time of financing so you're only holding a note for the difference rather than the whole purchase price.

3. Land contract
This option doesn't sign the title of the property over to the buyer. Instead, the buyer makes payments to the seller and the buyer and the seller share title on the property. This is also known as "equitable title." When the buyer pays the property off, the seller signs over the deed of the property to the buyer.

Seller financing offers creative options for buyers to buy homes and sellers to sell homes in a tough economy. These situations are also used to make it easier on the buyer. If you're having a hard time selling your home, come up with creative ways to move the transaction along. Seller financing may the answer to your home selling problem.