Confused about seller financing...

[Ryan King]

I've always thought seller financing was a good option in place of traditional bank loans but I'm not really seeing a benefit after looking into it. Most sellers want a balloon payment after 3-5 years. That's pretty fast. If I'm not qualified due to DTI now, I probably won't be in 3 years and the bank still isn't going to want to loan the balance to me right? After 3 years in a low volatile market, I would doubt I'd be at 25% equity either. So basically you need to have 20-25% upfront (needed for bank loan anyway) and you need to be able to figure out financing in a few years. Am I missing another exit strategy?

Thanks!

[Account Closed]

@Ryan King

The trick is to market yourself to the seller as someone who is trustworthy, will make payments on time every time and take care of their property. 

If you have a good credit score, show them. Take a credit card statement or something legit showing your scores.

If you have good references from past clients, get it in writing. Show them closing documents and offer up that past client's phone number (if they agree to be a reference). 

Lastly, and perhaps most importantly, offer a substantial down payment. I'm not saying it has to be 20% down, but it definitely helps. 

Explain to them that if the home is selling for 200k, they'll make more than $200k over the lifetime of the note b/c of interest earned. They have to claim it on their taxes as interest income, but still, in a low interest environment, many boomers wanting to retire or downsize can find owner financing a solid investment since they're making several times what they would on a similar cash deposit in a bank somewhere.