Craven Academy: Real Estate

A good way to avoid dealing with the usual lending sources is to have the seller carry back financing. This can be done pretty easily if the seller owns the property outright, that is, the seller has no mortgage loan on the property. While this is not the norm, it does happen often enough. In a case like this it is possible to make a deal with the seller in which you give a small down payment or maybe even no down payment at all. The seller will receive payments from you at a stated rate of interest for a specified period of time. The terms may include a balloon payment that is due at a certain date. An example would be that you buy a house for $100,000 with a 10% down payment ($10,000) at an interest rate of 8% for 30 years with a 5-year balloon. In plain English this means that you give the seller $10,000 when you buy the house and then make payments to him based on a $90,000 mortgage with a payment term of 30 years and an interest rate of 8%. The 5-year balloon means that the remaining balance of the loan is