How to Get Seller Financing for a Home

Having trouble getting traditional financing? If the seller doesn't need all the cash from the sale of the property to buy another home, he or she might be willing to offer you seller financing.

Things You'll Need

• Real Estate Agents
• Real Estate Attorneys
• Online Mortgage/finance Services

Instructions

1. Find out if the seller still owes anything on the property. If the property has no liens against it, the seller could also act as the lender in the transaction; payments would be made to the seller, not to a mortgage lender or banking institution.

2. Make an offer to the seller. Make it clear that you want the seller to finance the purchase.

3. Handle the purchase agreement just as you would with a regular lender - only you'll be the one to offer what terms you want: how much you want to finance (this depends on your down payment), how long you want to finance and what interest rate you want to pay. Of course, the seller must agree to your offer. Use a purchase agreement and receipt-for-deposit form.

4. Open an escrow account with a title company or have a real estate attorney handle the transaction.

Tips & Warnings

• Make sure you know the value of the property before you commit yourself to the agreement. Include an appraisal contingency to make sure the home is worth what you're paying. (Appraisal cost: $300 to $350 for a single family residence.)

• The seller may want a copy of your credit report.

• Interest paid to a seller for seller financing is deductible as long as it follows the same guidelines as for a standard mortgage.

• The transaction time for seller financing is usually much shorter, as there is no formal loan approval process.

• Seller financing saves the buyer money: There are no lender fees, no loan fees, no points. It's a good deal.

• When you get an appraisal for a purchase, the appraiser will typically only confirm that the property is worth what you're paying. Most likely the appraisal won't be a true determination of value unless you instruct the appraiser to appraise the property for market value. (The appraiser will need the seller's approval to get into property. An appraisal should take anywhere from one to three weeks to complete, depending on how busy the appraiser is.)