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Need Help With Your Downpayment? A Seller Carry-Back May Be Your Solution

07-25-2014About MortgagesEddie Knoell

Are you interested in buying a home and getting a mortgage in Arizona, but don’t have a large cash reserve for your down payment? Do you know about the option of a seller carry-back? A seller carry-back is a great way for a buyer with too small of a down payment to purchase a home. And as a seller, offering a small seller carry-back, is a great way to incentivize buyers if interest in your property has diminished.

A great way for a seller to incentivize a buyer to purchase their home is to offer a seller 15% loan to value carry-back loan. This scenario allows the buyer to put a minimum of 5% down, which in turn means they do not have to pay mortgage insurance.

Right now is a particularly good time to offer this type of incentive, since it is rare for banks to lend a 2nd mortgage above 80% loan to value.

A seller carry-back is a particularly great option for buyers who don’t have a large down payment and want to purchase a property with a sales price above $438,900. For more details on what this type of loan and seller carry-back option entails, please contact us at The Mortgage Brothers Team for more information.

Here is a brief review of the PROs and CONs of a seller carry-back:

Seller Pro: The sellers may be able to sell their home faster or for more money.

Buyer Pro: A buyer can purchase a home, even with low downpayment funds through the assistance of a seller carry-back transaction.

Seller Con: The seller is on the hook for the 2nd mortgage just like a bank would be.

Seller Pro: Offering a small carry-back makes a seller’s property more attractive to buyers, especially if interest in the property was low.

Seller Con: If the borrower defaults, the seller has to go through the same foreclosure processes as a bank.

Buyer Pro: With the help of a seller carry-back, the borrower may not have to pay mortgage insurance.

Seller Pro: Also, sellers should expect to make 6% to 7% in annual interest. If the seller wants to be aggressive, they could offer a low 3% to 4% interest rate.

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