Hal's Mortgage Blog

When mortgage interest rates ranged in the double digits back in the l970’s, seller financing was rather popular. Once rates began to fall, it fell out of favor. Now that lending standards have become tighter, we may see seller financing rise in popularity again. It may pay to know the seller financing options possible.

Lease to Own or Lease with Option
In the past, this has been the most common of the seller financing options. A portion of a renter’s payments goes to help finance the eventual purchase of the home. Most agreements include some type of deposit that is not refundable if the buyer decides not to buy. There is also generally an agreed upon expiration date on the right to buy.

Partial Financing Option
Perhaps the buyer can qualify for a mortgage but not enough to buy a particular property. In this case, the seller can finance part of the cost of the home and the lender can finance the other part. Note however that lenders may not be so willing to help finance these types of purchases in a tight loan market.

Seller Contributions
This option is more popular than ever and almost seems expected by many buyers in the current market. Traditional lenders may be concerned about the amount that sellers contribute to the buyer’s purchase, and many are limiting that amount to 3% of the home’s purchase price.

If you have additional questions, consult your real estate agent and mortgage professional for answers.