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Seller Carry Back Mortgages

Seller carry back mortgages are an agreement where a property owner provides financing to a buyer. The owner may finance the entire amount or a percentage of the purchase price. If the seller finances a percentage, the balance is usually financed through an assumable mortgage.

Engaging in seller carry back strategy can be beneficial to both seller and buyer. The seller benefits by being able to sell his property quickly and the buyer benefits by being able to purchase property he might not otherwise have been able to finance.

Seller carry back financing is relatively straightforward. It does require the drafting of legal documents, so it's a good idea to hire the services of a real estate attorney. At minimum you will want an attorney to review the documents to ensure they are legally binding.

A down payment is generally required when engaging in seller carry back mortgages, although there are instances when the buyer qualifies for zero-down financing. The typical seller carry back mortgage consists of 10% down, 10% seller carry back and 80% first mortgage.

When the seller finances a portion of the purchase price, the buyer must obtain financing from a mortgage lender. Some lenders view the carry back amount as instant equity for the buyer. When this occurs, the lender is more apt to provide a loan because it has a lower loan-to-value (LTV) ratio. Keep in mind some lenders do not allow seller carry back financing, so be upfront about your intentions when speaking with lenders.

Basically, there are two steps to seller carry back mortgages. First, a buyer must be pre-approved for a new mortgage. This process allows the buyer to determine how much seller carry back is necessary to obtain the mortgage.

Once the buyer is pre-approved, he can then locate a seller who is willing to provide seller carry back terms. Locating sellers is not as difficult as it may sound. In fact, millions of Americans are utilizing seller carry back mortgages and are eager to locate a buyer.

The seller carry back portion is typically repaid within 5 to 7 years, while the conventional mortgage is repaid within 15 to 30 years. If the seller finances a portion of the purchase amount, the buyer will have two mortgage payments -- one to the mortgage company and one to the seller.

Seller carry back mortgages are a good solution for individuals who are credit-challenged. Each seller will utilize different methods, so be certain to thoroughly understand the terms before signing any papers.

If you are a property owner considering offering seller carry back financing, it's important to note if the buyer files bankruptcy, you will be the last person paid. The first mortgage will always be repaid first.

If you currently hold a seller carry back note and are interested in selling it for a lump sum of cash, we'd like to talk with you. It's easy to turn your seller carry back mortgage into cash and only takes about three weeks to complete the process.

There is no obligation to speak with one of our consultants. To begin, provide a few details about your situation by filling out the Seller Carry Back Mortgage form. One of our consultants will contact you within 48 hours to further discuss your financial needs. We look forward to working with you and helping you achieve your financial goals.


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Published on May 09, 2008 at 05:58 AM | Comments: 2

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Comments

Does a seller offering financing to a buyer have to issue 1098s and a payment schedule to the buyer?

Lora | March 31, 2010 9:13 PM

 


You need to contact your accountant for the exact answer.

Make sure you do your due diligence first.

Here is some information below.

A form filed with the Internal Revenue Service (IRS) that details the amount of interest and mortgage-related expenses paid on a mortgage during the tax year. These expenses can be used as deductions on a U.S. income tax form, Schedule A, which reduces taxable income and the overall amount owed to the IRS. The mortgage lender is required by the IRS to provide this form to borrowers.


1. 1098-C details the donations of vehicles, boats and airplanes
2. 1098-E is for the interest paid on qualified student loans
3. 1098-T details tuition and related fees during the year.

Simon Volkov | April 5, 2010 10:39 AM

 

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