Financing in 92101>Question Details

Voices Member,  in Temecula, CA

what should i expect to pay in interest if the seller agrees to finace my purchase of their property?

Asked by Voices Member, Temecula, CA Wed Oct 19, 2011

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When a seller finances the sale of their home due to your credit challenges, you should expect to pay 1-2% higher than the going rate. Make sure you have an attorney review anything you are asked to sign.
0 votes Thank Flag Link Wed Oct 19, 2011
Whatever you can negotiate. Probably a little higher than current conventional 30 year fixed rates. Seller financing is a GREAT way to go if you can do it. You reduce closing costs, it won't report to your credit and have a lot of flexibility down the road.
1 vote Thank Flag Link Wed Oct 19, 2011
Before you agree to any financing, make sure the title of the property is clear of liens such as IRS, franchise tax board, judgments as well as child support back payments.
If the loan term is to be for less than 10 years, then I would suggest doing an interest only loan at a rate of 6.0% with a balloon due when the note matures. I'm not sure why you cannot obtain financing, but I would make every effort to do so instead. If you are taking over payments for the current homeowner, keep in mind that the lender can call in the note if they find out and commence foreclosure immediately. Typically, this will happen by accident when your homeowner's insurance is sent to them. They'll notice that the insured is not the actual borrower and this is a breach of contract per the note. Good luck and make sure you ask a lot of questions.
1 vote Thank Flag Link Wed Oct 19, 2011
Hi Jane,

You should expect to pay what your agent and their agent negotiates. Once you have an agreement on the terms, we would recommend you have a real estate attorney draft the agreement for signature. We would further recommend you get an executed and notarized trust deed to secure both your and the sellers interests in the property and have a title company record it at the county recorders office.

We hope this helps,

Mark & Kari Shea
Shea Real Estate
1 vote Thank Flag Link Wed Oct 19, 2011
I will usually require points plus a minimum of 2-4% over prime depending on downpayment, credit and employment history.
0 votes Thank Flag Link Wed Oct 19, 2011
If the seller agrees to finance, the terms should benefit both of you. Insure you can make the payments based on the rate, terms and conditions. I would also check with the first mortgage lender to insure what is agreed upon meets the banks guidelines for seller financing. Carry-back loans have resurged as loan limits were reduced this year.
0 votes Thank Flag Link Wed Oct 19, 2011
Hi Jane,
On average it is .5-1% higher than the going interest rate however this is another item that can be negotiated as a term of the sale. Are you obtaining a first loan from a mortgage company and then a small second from the seller? This is happening often now due to the high loan limits dropping. If this is your case you want to make sure that the first lender doesn't have specific stipulations to secondary seller financing and if they do you need to find out those terms prior to negotiating with the Seller.
Any additional questions please feel free to contact me.
All my best,
Tiffany Trost
Ascent Real Estate, Inc.
Web Reference:
0 votes Thank Flag Link Wed Oct 19, 2011
It depends on a number of factors.

1. Loan to Value. (How much of a loan)
2. Length and payments terms of loan
3. Your credit ratings and qualifications.

If you need them to finance because you would not otherwise qualify for a loan from a bank then expect to pay a higher than market interest rate.

If you would otherwise qualify but they prefer to carryback the debt, then you should expect a close to market rate.

Make sure you are working with or have an agent representing you as you need an advocoate in this kind of transaction. Feel free to let me know if I can help.

Best, Jason
Web Reference:
0 votes Thank Flag Link Wed Oct 19, 2011
Jane - I would think so. The seller should lay out all the terms in writing which you have agreed to.
Good luck! The Marie Souza Team - Top Selling on Cape Cod
Cape Cod Real Estate Services
Phone: 508-790-2000
0 votes Thank Flag Link Wed Oct 19, 2011
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