Working with a Bank with Seller Finanacing

[Chad Ballard]

I am a bit surprised that I am having trouble finding a bank (bank, local credit union, etc will all be referred to as the bank) that will finance a deal and was looking for some additional insight.

I have a productive rental (with mortgage) but it is making it a bit tough to find conventional financing for a primary residence (2 years tax returns required with rental). I recently moved out of the unit I am now renting and now I am looking for a primary residence to take advantage of the low rates for the long term (not an investment property).

The deal would look something like this:

Property Value: +/- $200k
Current Mortgage: $100k

Bank Financed @current rates: $150k - used to pay off current mortgage, $50k to the seller
Seller Carry Back @6.5%: $45k
My Down Payment: $5k

(This is a bit simplistic since I am not including any of the closing costs, repairs concessions, etc. in the post but I am sure you get the idea.)

I found a place and the seller is willing to carry back but I cannot seem to find a bank that will work with me. There are a few "maybes" and a lot of "I will have to check on that...nope sorry" and "it is not our policy to give loans like that" along with the brokers that won't give me a straight answer. (My guess is they are looking for other options with me to drive business which I don't blame them.)

I must be missing something is the way I am presenting the deal since the current mortgage will be paid off so there are no due on sale clauses to worry about it seems like a pretty low risk deal for the bank since the risk is transferred to the seller who would be in second position.

Anyone have a banks perspective on why they would NOT like to do a deal like this? I have talked to about 20 banks (have about 10 more on my list) now in the area with only one that is really considering it.

Thanks everyone.

Chad