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Seller Will Finance |
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What does it mean when the owner of a house will hold the mortgage? I have a chance to do this but I don't know all that this entails and the difference of aquiring a mortgage the conventional way. |
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It means the seller will lend you the money to buy the house. You'll get your loan from the seller instead of from a bank. Perhaps the seller wants to do that for tax purposes, owing tax only year by year as the money is collected. Perhaps the seller wants a steady income for years ahead, instead of a lum sum today. Or perhaps the seller fears that the property wouldn't meet the standards of a lending institution, or that a bank's appraiser wouldn't consider it worth what you're paying.
Advantages to you: You'll pay less in closing costs than you would with an institutional lender. You'll have a smoother more prompt path to settlement. Just make sure your mortgage documents are subject to approval by your own attorney before you sign anything.
Disadvantages to you: You won't have the benefit of a bank's appraisal, so make sure what you're paying is in line with the recent sale prices of nearby similar property. If you're not already working with a real estate broker, you may find one to advise you for a reasonable fee.
Second disadvantage: You won't have the protection of a bank's inspection, so hire your own home inspector, and be sure your purchase contract gives you the right to drop out if the inspector's report isn't satisfactory.
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Edith
Originally published on October 1, 2008 |
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