When purchasing property, there are three primary ways of purchasing land: a bank loan, lending institutions, or seller financing. In situations where a bank or lending institution are not viable options, seller financing may be the best way forward — and it comes with many advantages over traditional bank loans.
Standard Overview of Seller-Financed Loans
Traditionally, when purchasing property, individuals seek a loan from a bank or other lending institution. But when a home or property is sold through a seller financing option, the seller then plays the role of the lender by extending credit to the buyer, minus any down payment.
The buyer and seller will sign a promissory note and then finalize this process by recording a deed of trust with the county. As with any traditional loan, the buyer then repays the seller over time, according to the terms agreed to in the promissory note.
Common Types of Seller Financing Options
When reviewing seller financing options, be advised that some can act more like rental agreements as opposed to traditional loans, and MIGHT offer unfavorable loan terms. With that being established, the following are common types of seller financing agreements:
- Land Contracts: a land contract is an agreement to purchase a piece of real estate.
- Assumable Mortgage: a type of home financing in which buyers can buy a home by assuming responsibility for the seller’s current mortgage.
- Lease Purchases: this is essentially a “rent-to-own” agreement.
- Land Loans: used to facilitate and finance the purchase of a piece of property at a later date.
- Holding Mortgages: A homeowner agrees to serve as a lender for the home buyer, providing the loan for the purchase.
Advantages of Seller Financing
The following are some very important advantages of utilizing seller financing over traditional financing options:
- Great for those buyers who are unable to pursue a traditional loan but with a means of purchasing property.
- The seller and buyer determine the parameters for the loan including: interest rates, payment schedule, and refinancing options. These would traditionally be taken care of by a bank or lending institution.
- Because the traditional process of applying for a loan through a bank or lending institution is subtracted from the process, seller-financed loans can close quicker than traditional sales.
- Can produce a large capital gain in tax savings over the course of the term of the agreement.
- One can sell the promissory note to an investor, if the situation calls for that action.
SRC Land: Offering Seller-financed Properties for Sale in Harlingen
With all of the advantages mentioned, seller financing loans may be the best option for those interested in purchasing property for sale in Harlingen.
If after reviewing all of the information, you still have questions, contact the knowledgeable staff of SRC Land. We’re ready to help you find the property of your dreams.