Holding A Mortgage

Sometimes people have a good reason for not wanting to take out a bank loan, but often, when they ask the seller to hold a mortgage, it's because they can't meet institutional lenders' standards.Then the question is: should you lend that much money to someone banks consider too risky? In most cases, your present mortgage must be paid off when you sell the property, so you have to find cash for that. Sometimes, if it's an FHA or a VA, it could be taken over (assumed) by your buyers, but they often have to prove qualification to make the payments, and you might still be responsible if they didn't. Before you commit yourselves to anything, insist on seeing a credit report on the prospective buyers.Your real estate broker, accountant or lawyer can help you get one and interpret it, or you can ask the buyers to pull a report on themselves and bring it to you.Especially if you're going to lend strangers all that money, your own lawyer ought to be involved right from the start, before you sign anything. The higher the cash down payment, the more safety for your loan.Banking theory says 20 percent down is a good figure.You ask about pros and cons: When you hold the mortgage, your home is more easily sold because financing is readily available to buyers and they'll save on closing costs.You can receive more interest that is currently available in savings accounts or CDs. But -- here's the big catch --that's true only if the buyers can be depended on to make the payments.