With the mortgage industry developing stricter lending guidelines daily, many consumers seem to befeeling as though purchase money financing is unattainable.  These would-be borrowers may have less-than-stellar credit, lack two years of consistent income due to some major life change or have walked into a drastic change in their finances for any number of reasons.

One option I see frequently with Mendocino County Real Estate (especially land) is seller financing.  This is a viable alternative on properties where the seller has sufficient equity (best if they own the property free & clear) and can offer to "carry the paper" for the buyer.  The buyer comes in with a down payment, which can vary widely, depending on the type of property and the value....typically 20-30%.  The seller then agrees to finance the balance at a mutually agreed upon interest rate for a mutually agreed on timeframe.  With Mendocino County Real Estate (and other CA areas as well), we use the Seller Financing Addendum to spell out the terms of the financing.  The seller sometimes requests a credit report from the buyer and also has a certain timeframe to request additional evidence of "creditworthiness" so they may decide whether to choose to work with the buyer. 

With Mendocino County Real Estate, we often see sellers choose to extend financing to borrowers who may not on the surface be "credit-worthy" with a higher down payment, or a higher interest rate.  The range of terms can vary widely, but we are typically seeing 7-8% interest, with some as low as 5% and some as high as 10%.  Loan terms vary from 3-15 years typically, with 5-10 years being what I see most frequently. I typically provide my buyer and seller clients with a variety of scenarios that illustrate down, interest, payment and term so they can see the difference that each of these factors makes in their financial situation over both the short and long term.

One concern for buyers is whether they will be able to obtain conventional financing at the end of the term they've arranged with the seller.  If the seller agrees to finance for three years, a buyer must be working to gain that income stability and also to make sure that the value does not decline to a point where they lose the initial equity from their down payment. 

I have seen some cases with Mendocino County Real Estate where the seller will renegotiate the terms and "refinance" the buyer for a new term.  One client explained this to me yesterday by telling me that he would be happy to go longer than three years, and would provide such a guarantee in the initial agreement, he just wanted the ability to renegotiate terms relative to whatever economic factors exist at that point in time.  For example, if typical interest rates for Mendocino County Real Estate seller financing are up to 12%, he would want to be able to get that from the borrower should he continue to carry the paper.

Owner financing is a popular alternative with Mendocino County Real Estate, and I'm sure in other regions as well.  These trying financial times make it important for us as agents to be knowledgeable about each option that may serve one of our clients.  This one is helping me close deals, I'd love to hear how different geographical regions are finding success with seller financing - what kind of terms & standards are you seeing?