Buying with seller financing

Who it suits

Seller financing helps most when a bank says no or says it slowly. New to the idea? Start with what seller financing is.

• Self-employed buyers whose tax returns show less income than a bank wants to see.
• Buyers still inside a lender's waiting period after a bankruptcy, foreclosure or short sale.
• Foreign buyers with no US credit history or US income.
• Investors who want to close in a few weeks rather than 30 to 45 days.
• Buyers of land and rural property, which many banks will not finance without a large down payment.

What to expect on terms

Every deal is negotiated. These ranges are typical, not promises.

• Down payment. Usually 10 to 30 percent. More down often buys a lower rate or a longer term.
• Interest rate. Usually above a bank rate, because the seller takes the risk a bank normally would.
• Term and balloon. Often 3 to 10 years with a balloon at the end, with payments figured on a 15 to 30 year schedule. Most buyers refinance with a bank before the balloon is due.

How to buy, step by step

1. Find a listing. The listings page filters by your down payment, monthly budget, type and state.
2. Create a free account. New accounts start with 20 credits.
3. Message the seller from the listing page and ask what the listing does not answer. The first message to a seller costs 10 credits; replies are free.
4. Send an offer with your price, down payment, rate and term (10 credits). You both see a deal score, and either of you can counter.
5. Agree on price and terms, and put them in writing.
6. Have a real estate attorney draft the promissory note and the deed of trust or mortgage.
7. Close and record the documents with the county, so your ownership and the seller's lien are on public record.
8. Set up servicing: a loan servicing company collects payments, keeps the history and sends year-end interest statements.

Due diligence checklist

This site does not check listings or terms. These checks are yours to make.

• Title searchOrder one from a title company and buy an owner's title insurance policy.
• Existing liensFind out whether the seller still has a mortgage. If it has a due-on-sale clause, the seller's lender can demand full repayment when the property sells, which puts your purchase at risk.
• InspectionPay for a professional inspection. No bank is involved to require one.
• InsuranceGet a quote before closing. The seller will usually ask to be named on the policy.
• Property taxesConfirm taxes are paid up to date and agree who pays them from now on.
• ServicingAgree who will service the loan and how you will get a record of every payment.

Red flags