![]() ![]() Just like a traditional mortgage arrangement, in a seller-financed transaction a buyer’s monthly payment will likely include costs beyond the principal loan balance including interest, taxes, and additional fees. Source: (Kristine Isabedra/ Death to the Stock Photo) Pencil in other figures that impact the mortgage payment amount Your buyer will also need to pay interest on the loan and other fees. “On the contract, there’s a spot for the agreed-upon sales price and the earnest deposit down, then it clearly identifies the loan balance in the line items,” explains Waters.īut these aren’t the only financial figures you need to take into account when setting up the amount of the monthly mortgage payment. The three big numbers it needs to include are: Spell out the big numbers: How much are you willing to lend?įirst and foremost the seller financing contract is a financial document so it needs to get detailed when spelling out the financial terms-including how much the buyer owes and how they’re going to pay it back. Ultimately, to be safe, it’s always best to hire an agent or an attorney to at least look at the paperwork and make sure you’ve covered all your bases. Obtaining samples of completed, legally binding seller financing contracts filed in your state is also a great resource to find ideas of terms and conditions to cover in your document. ![]() “So if you have any completed loan documentation you can work from, that would be a huge benefit.” “You want your contract to include all the things that any loan officer at any loan company is going to have in their contracts,” says Waters. However, a blank form can’t tell you what terms and conditions are legal in your state, or how they need to be worded in order to be legally binding. It’s true that the blank seller financing contract you can get online or from a local title company can be modified to fit your specific needs. We always say that the contract is determined by what the buyer is willing to pay and the seller is willing to sell for-in regards to the price, house condition, and loan terms.” ![]() “With owner financing, there are any number of amendments or addendums that you can add to a contract. “You need a contract that’s legal in your state, but the loan agreement itself is all totally negotiable,” says Edie Waters a top-selling agent in Kansas City, Missouri, who’s sold over 74% more properties than the average agent. However, no matter what type of contract you use, it’s paramount that the document adheres to state laws and regulations. ![]() The first step to making your loan official? Find out which type of seller financing contract you’ll need to carry out the deal.Ĭontract terms are the main deciding factor as to whether you’ll need to draw up a real estate purchase agreement, a land contract, or another type of contract. Ready to think like a lawyer? Source: (Matthew Addington/ Death to the Stock Photo) Start with the right type of contract Who to consult to make sure the contract meets the requirements of your state laws.Enforceable terms in the event of a loan default.Buyer responsibilities such as home maintenance and repairs.How to set up a payment schedule in your favor.Must-have contract financing terms such as loan payment amounts, interest, taxes, insurance, and additional fees.The different types of seller financing contracts (and how to find the right one for your scenario).To avoid a worst-case scenario, follow these pointers on drafting a contract that guards your interests as the seller and financier. Without the right terms and legal protections in place, you’ll have no recourse if the buyer falls behind on payments or defaults on the note. And you should treat the process with the same level of vigilance using an airtight and enforceable seller financing contract. Traditional mortgage lenders require home buyers to sign multiple rounds of endless paperwork to lay out the terms and consequences of a deal gone wrong.īut if you’re one of the less than 10% of sellers who’s agreed to personally give your buyer a mortgage in what’s called a seller-financed deal, you’re the lender now. DISCLAIMER: This article is meant for educational purposes only and is not intended to be construed as financial, tax, or legal advice. HomeLight always encourages you to reach out to an advisor regarding your own situation. ![]()
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