How To Structure Deal With Mortgage AND Seller Financing

Question

Caroline Gerardo · Answer

In order for seller to accept this risk you have to offer them something that makes your offer better than everyone else. Everyone else is offering qualified deal with 25% down and they walk with all their cash. You need to offer them a very high interest rate of return for the risk of low down and not qualified, you won't be able to refinance without the equity and the seller will know their only option in non payment is foreclosure.

Offer them 12% interest rate 30 year fixed, with prepayment penalty of 2% if you don't give them a 6 month advance notice of early payoff.

Who is seller? Family members may want their money and you will need to add in some pay downs to them in a year...  Maybe they have owned it a long time and capital gains are an issue as they were for you? Unknown as to the correct answer - it depends on the seller's desires, plans, tax situation.

Tom S. · Answer

@Juan V Lopez  Yes, start with asking the seller because that's the deciding factor.  If the seller needs cash from the sale now, then obviously seller financing won't work.

You'll also have to check with the main lender that they'll allow a 2nd on the loan (the seller financing) and that they're OK with essentially 100% financing.  Sometimes a bank will still cap the 1st and 2nd combined at 80%.

Good luck!

Juan V Lopez · Answer

Grateful for your input, @Caroline Gerardo. Great insight.