Seller financing- is when the purchaser/buyer will make some sort of down payment to the seller, and then make installment payments (usually on a monthly basis) over a specified time, at an agreed-upon price, until the loan is fully paid.
The Pros of Seller Financing.
1. The closing process can be faster, Since no banks are involved.
2. Closing costs are lower, no bank fees or appraisal needed.
3. The down payment can vary, the amount can be whatever the seller and buyer agree to.
The Cons of Seller Financing.
There are also a few red flags to consider when using seller financing:
1. Buyers could expect to pay a higher interest rate than they would versus a bank.
2. Buyers will still have to prove that they are worthy borrowers, The buyer has to show they can afford the monthly payment.
3. Buyers need to make sure the seller owns the house free and clear, banking institutions have a due on sale clause, which the bank has a right to demand the mortgage to be paid in full, the lender can foreclose. The best course of action is to make sure the house has no mortgage.