Seller Financing Gains in Popularity in this Economy
One of the issues right now in the housing market is how difficult it is to get lender financing. After all, many lenders are reluctant to lend. They’ve gone from offering loans to just about anyone to the other extreme: Getting approved for a mortgage loan can be a lot of hassle.
Which is why seller financing is starting to look mighty attractive right now.
Seller financing
With seller financing, the person offering the house finances the buyer. This arrangement can be full or in part. For example, if the mortgage lender only agrees to finance $150,000 of a $175,000 house, the seller can finance the other $25,000. Or, it is possible to get 100% seller financing, if the homeowner is willing to take the risk.
Seller financing works in a way that the buyer makes payments to the seller. This can work out for the buyer, since he or she might not normally have been approved for a home mortgage loan. The arrangement can also work for the seller, since it means that he or she will be receiving the interest from the loan, rather than a bank.
Risks of seller financing
While it can ease the way to selling a home and help you get it off the market quicker, seller financing does have its risks. First of all, the seller is the one that has to foreclose on the home if the buyer defaults and stops paying the loan. This means that it is possible for the seller to lose out. Also, the seller has to make sure all of the paperwork is in order — from loan documents to title transfer to anything else that may come up. A real estate attorney or real estate agent can help with this.
If you are having trouble buying or selling a home in this economy, it might be worth looking into seller financing. Just be aware that buyers will probably have to pay more in interest, and sellers take on increased risk.
