How to use seller Carried 2nds with Conventional Financing

Seller carried 2nds are allow behind a fannie mae loan as long as it meets the guidelines for combined loan to value.

If the first loan is 80% the 2nd is 15% then we have 95% CLTV or combined loan to value. This would work with a primary residence buyer since we can have a higher CLTV or LTV (loan to value). On conventional financing we can go up to 95-97% CLTV with primary residences.

On a second home (max 85% CLTV) or an investment property (70-85% LTV max) the loan to values are much lower so its harder to sell the property from a seller's stand point to these buyers because we're looking for a buyer with more down payment.

The seller carried second cannot have:

- a balloon or feature that would have the loan due and payable in under 5 years

- be negatively amortizing

The seller carried second can have:

- interest only payments with terms equal to greater than 5 years

- adjustable rate loans with terms equal to or greater than 5 years but the payment cannot adjust more than 1 once per year (must be level for each 12 month segment)

- rate based on market rate

Its important to plan these seller carried second's if you plan on utilizing them to sell a property because the way they are closed and recorded affects when you can be paid back completely.

These seller carried 2nd's can also be utilized on FHA and VA financing with similar guidelines as well.

Let me know if you have any additional questions on the topic.