CREATIVE FINANCE

Seller Financing Explained (For Buyers and Sellers)

Updated March 2026

The Basic Setup

The seller acts as the bank. Instead of you getting a mortgage from a lender, the seller carries a note. You make monthly payments to the seller, typically with a balloon payment due in 3-7 years. The seller gets steady income and a secured note; you get financing without bank qualification. Terms are negotiable — that's the whole point.

Typical Terms

Interest rate: 5-8% (often slightly below market since the seller saves on realtor commissions and closing costs). Down payment: 10-20% (negotiable — some sellers accept 5%). Amortization: 20-30 years with a 5-7 year balloon (you'll need to refinance or sell before the balloon). No PMI, no appraisal required, no underwriting headaches.

When It Benefits You

You can't qualify for conventional or DSCR financing (credit issues, too many properties, complex tax returns). You want to negotiate creative terms (interest-only for the first year, lower down payment, no prepayment penalty). Or you've found a seller who owns the property free-and-clear and is willing to carry paper for the monthly income.

When It Benefits the Seller

Sellers benefit from installment sale tax treatment (spreading capital gains over multiple years), monthly income from the note, higher effective sale price (buyers pay more for flexible terms), and avoiding the hassle of listing and showing. Retired sellers who own properties free-and-clear are the ideal candidates — they want income, not a lump sum they'll put in a 4% CD.