How to Carry a Loan

By Leyla Norman

In some instances, sellers are willing to finance all or part of the purchase price of their homes for a buyer. Bankers Escrow Corporation's website states that 10 percent of home sales in the United States have some type of owner-carry loan. This may happen if a buyer has trouble getting a home mortgage. This might be true if he has poor credit, is self-employed or gets much of his income from commission. A seller can finance part or all of the purchase price of the home and sellers typically require higher down payments than if the buyer had a full mortgage from a bank.

Ask your buyer to provide sufficient proof of income to make the monthly payments on the property. Require proof of down payment available as well. This can help you avoid dealing with late payments or the buyer not making payments at all. It also helps you avoid potential foreclosure proceedings on the buyer, which can be expensive and time consuming.

Work with your buyer to decide a selling price. Also agree on the monthly payment. The owner-carry loan will be a first mortgage if you have paid off the property. If the property is not paid in full, the existing loan will supersede the owner-carry loan, and the owner-carry loan will be a second mortgage. You might agree to finance part of the selling price of the house, have a bank finance the bulk of it and require a 40 or 50 percent down payment from the seller.

Contact a licensed and bonded collection agency. This will help ensure that you are paid and that your sale is legal. Work with a lawyer to help you understand all of your rights and responsibilities as a seller. For example, if you fail to pay your existing mortgage with a payment from the buyer on his secondary mortgage, the bank may foreclose on him.

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