Seller Assisted Home Loans

Reverse mortgages are a great way for seniors to access the equity they have built into their homes. Thanks to recent legislation, seniors can now use a reverse mortgage loan to buy a home they do not own through a unique FHA-backed home loan.

The Home Equity Conversion Mortgage (HECM) was designed to make it easier and more affordable to seniors to buy a home. Instead of buying a home with a traditional mortgage, paying closing costs and then taking out a reverse mortgage on the home with an additional set of closing costs, the HECM program allows you to combine all of this into a single transaction.

Carry-Back Loan Benefits for Seller

There are several reasons a buyer may approach the seller to carry the mortgage, such as when interest rates are very high or the buyer cannot get approved through a bank. There are a few ways to do a seller carry-back, including the seller carrying 100% of the financing when the home is paid off. The borrower may also be able to get a conventional mortgage for some of the purchase price and request that the seller finance the remainder. The seller can also allow the borrower to take over making loan payments, with the loan remaining in the home seller's name.

As a seller, you can enjoy many potential benefits by agreeing to a seller assisted mortgage. There are also many reasons you may consider this option such as:

You are in a down market and agreeing to carry the mortgage makes your property more appealing.
The buyer does not qualify for a loan from a financial institution.
You want to defer some of the purchase price to avoid capital gains on the sale of your home.
You want steady, passive income from mortgage payments.
You may get a higher sales price by carrying the mortgage.
Your home is non-conforming and banks will not make a mortgage on it.
You want a higher rate of return than other investments can offer.

Seller Assisted Home Loan Disadvantages

There are downsides to carrying the loan for a buyer. If the buyer defaults, you will need to go through the foreclosure process which is very expensive. You may even be left with too little equity after you are forced to make up back payments, or pay commissions and closing costs to sell the home. You will also be leaving money tied up in the property.

Sellers also have the option to convert a seller carry-back into cash by selling the loan to a private investor. Bear in mind, this is typically done for less than face value. You can expect to lose 10-30% of the unpaid balance if you choose this option.

Carry-Back Loan Benefits for Buyer

Home buyers also stand to enjoy many benefits with a seller-assisted mortgage such as:

Sellers are typically less strict in terms of credit score, debt-to-income, and other factors.
You can personalize your loan by negotiating all terms including payment options.
Your down payment can be negotiated with the seller. Some sellers will even accept multiple payments toward your down payment.
Closing is faster because you are not waiting for the approval of a lender.
No origination and processing fees mean lower closing costs.

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