How are seller financing deals structured?

[Kyle M.]

Hi all,

To the folks who have experience with seller financing, what does the typical structure look like? Obviously 100% seller financing would work best in most cases, (no appraisals/other dealings with banks for less fees and compliance) but are there other structures? I understand a big comeback to asking for seller financing is "the seller needs the money now that's why he is selling." 75-80% of the value of the property coming to the seller is still a large amount. 

Is it possible to ask for the seller to hold a portion of the note and then go to a bank and get a loan for the other portion? Proposed structure looking like below:

- Seller private lends the buyer 20% of purchase price @ X interest rate/term (with potential 2nd lien position on the property)

- Buyer goes to get 80% of purchase price @ X interest rate/term in first lien position from bank

Additionally, could that 20% down payment be raised from other private individuals with the potential to come in on the deal at 2nd lien?

Any insight would be appreciated!

[Jaysen Medhurst]

@Kyle M., depends on the lender and the mortgage. Some don't care, some may ask where the down payment is coming from. Some may want to see the $$ in an account for a certain amount of time. You'll get a lot more flexibility if you plan to owner occupy.

I was talking to a lender a few weeks ago and they said they wouldn't lend if the total LTV was over 80%, no matter what their piece of that pie was. To be fair, this was a commercial loan on a portfolio of 15+ properties, so not your everyday deal.