March 4

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Seller Financing and Restrictions 2014

By David Baker

Laveen Seller Financing Options

Starting January 10, 2014 the new Dodd Frank law goes into effect.  While many of the items addressed by the Dodd Frank act had already been acted on by several lending institutions there is one that likely is not up to date, and that is the seller financier.  This is when a home owner sells their property, and similar to a bank lends the buyer a certain amount of money for the purchase of the home.  Generally home seller must have equity in the home, and not be in a need to completely cash out at time of sale.

Seller Financing carry back
Seller Financing

In the past, if a buyer did not qualify for a loan, and the seller was willing often an agreement for a seller carry back was a great option.  Well, thanks to the new Dodd Frank act, you may see less and less of the seller carry backs being an option.  Why?  Well now provisions in the Dodd Frank act must also be carried out by an owner wanting to offer a carry back option.  Provision needed:

1.  Seller must verify buyer’s ability to repay.  (Based on 148 pg. rule book regarding credit, income and assets.

2.   The loan must be fully amortized, and NO balloon payments are allowed.

3.  Loan needs to be fixed rate for at least 5 years.


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