Partial Seller Financing

[Zach Denny]

Hi BP,

I'm wondering what people's experience has been with partial seller financing. I've heard stories on the podcast of financing 75% conventionally through the bank and basically doing seller financing on the down payment, so 25% to them. So the buyer doesn't put much down and just pays the closing costs.

I have a seller who is willing to do this, but what about the bank? I assume they won't like this? They may ask where the downpayment is coming from?

Some mortgages also don't allow a second lien on the property, so how do you provide the seller with assurance?

Thanks BP!

[Jonathan Taylor]

@Zach Denny Think of this in terms of riskiness. On paper a 100% CLTV for you, the buyer is a dream, but as a lender, its very very risky. If the deal goes south and you have next to zero money in the deal, selling a short sale or walking isn't as risky for you since you aren't losing much. Most banks/credit unions have clauses that prohibit borrowed down payment funds or seconds on the property.

The options are going to non QM lenders who allow this. I have a few lenders who do but they still require some money from the borrower so they have skin in the game.  You will pay for the higher risk with higher rates and origination fees but if the deal makes sense then congrats. Also, for low value properties, most lenders wont take the risk.