A real estate transaction where the seller provides financing directly to the buyer, bypassing traditional mortgage lenders, allows individuals to acquire real estate without conventional bank loans. This arrangement typically involves a promissory note secured by a deed of trust or mortgage, similar to a bank loan, but with the seller acting as the lender. A common example involves a buyer making a down payment to the seller and then making regular monthly payments, including principal and interest, directly to the seller until the loan is paid in full.
This approach offers unique advantages for both buyers and sellers. Buyers who might not qualify for traditional financing due to credit history, self-employment, or other factors can gain access to homeownership. Sellers can potentially sell their property more quickly, attract a wider pool of buyers, and possibly earn a higher interest rate than they could obtain through traditional investment vehicles. Historically, seller financing has played a role in periods of tight credit markets, offering an alternative path to property ownership. It continues to be a relevant option in various market conditions.
