A seller carry back loan can often seem like a great choice. However, it is not a zero risk option. In fact, at CMA, regardless of an individual’s personal financial history or current economic situation, we welcome the opportunity to analyze each borrower’s financial profile to help determine the best loan option for the borrower. Our Mortgage Advisors are available at (800) 927-6560 to help borrowers navigate the loan application process and understand all of their options.
Seller Carry Back Loan
This type of loan is also called seller financing. Basically, the seller is directly responsible for providing the buyer with a mortgage to purchase the seller’s real estate. The seller accomplishes this by financing the purchase themselves if they own the property outright or currently owe less than the buyer’s down payment. The buyer then signs a promissory note indicating their intention to repay the loan. The house itself then serves as collateral against repayment of the loan. The seller becomes the lender and the buyer becomes the owner of the property.
Why A Seller Carry-Back Loan?
There are several financial reasons that potential buyers consider this type of loan. The most common of which is that they may have been denied a traditional mortgage through a traditional lender at some point. This has lead, understandably, to frustration on their part and a distrust of traditional lenders when it comes time to reexamine their options.
This type of loan is also often touted by proponents as having lower overall costs when compared to a traditional mortgage. The seller is often willing to absorb some of the related costs or include them in the cost of the financing. The interest rate is negotiable between the buyer and seller.
However, the number one reason that most buyers decide to go with seller financing is because they cannot obtain traditional financing.
Pitfalls of Seller Carry-Back Loan
Generally a Seller Carry-Back loan has a balloon payment due within 5 to 10 years which can be very dangerous for the buyer if the buyer can’t qualify for traditional financing when the loan is due. If a buyer could have qualified for a traditional mortgage at the time of purchase, they may find themselves with interest rate risk when they are forced to refinance the loan, if interest rates are higher. Also, some sellers offer Seller Carry-Back loans because there is an issue with the property and traditional lenders will not offer financing on the property. CMA strongly recommends the Buyer order an appraisal and inspections when buying a home with Seller Financing.
Why California Mortgage Advisors
At CMA, we understand that borrowers operating under unusual or less than ideal financial circumstances may feel like they have limited options when it comes to obtaining a traditional mortgage through a traditional lender. However, CMA is more than just a traditional lender, CMA offers a wide range of loan products to meet the needs of all types of borrowers. We are an industry leader offering customized loans for borrowers.
Our Mortgage Advisors do not push borrowers into loan packages or terms that do not meet the needs and goals of the borrowers. Instead, CMA Mortgage Advisors examine each borrower’s personal financial history on an individual basis and work with that borrower to craft a mortgage that reflects their unique economic situation.
More importantly, California Mortgage Advisors Inc. offers stability and reliability. We are governed by state and federal regulators and guidelines, and the weight of our reputation and professional integrity. Call us at (800) 927-6560 and let one of our Mortgage Advisors provide you with the advice, expertise, and service that you deserve.