Homeseller financing 

 April 3, 2019

By George  

minutes read time

Home Seller’s Information Center
Although you will, in all likelihood, not be directly involved in the financing when you sell your home, it is a good idea to familiarize yourself with the different options available so that you are prepared should questions or problems arise regarding your buyer’s financing. To be unsure in these matters could cost you money when a contract is presented with specific financing contingencies. You need to become familiar with current rates and what the current discount points and origination fees associated with those rates are. Although you are probably fairly well acquainted with mortgage financing (assuming you have a mortgage on your home now), it is always a good idea to review and keep up to date on the current situation.

Types of Mortgages

Fixed: A fixed term (for example, 15 or 30 years) as well as a fixed interest rate. The interest rate and term are fixed at the start of the mortgage. The monthly amount for the payment of principal and interest will not change during the term of the mortgage.

Adjustable: Often referred to as an ARM (Adjustable Rate Mortgage). The interest rate on your mortgage will be adjusted up or down according to current interest rate levels. The monthly amount for your principal and interest payment will go up or down with these rate changes.

Conventional, FHA (Federal Housing Authority) and VA (Veteran’s Administration) loans are all available in both fixed and adjustable forms.

Seller Financing: Depending on your equity position, it is possible that you may get an offer for your home with a seller financing contingency. This type of offer may or may not be to your advantage. Due to the many variances (and possible pitfalls) involved in such transactions, it is highly recommended that you review any contract with a seller financing contingency with your attorney and financial advisor.

Assumable Loans: Although the vast majority of conventional loans have a “due on sale” clause (meaning the loan must be paid off if you sell your house), certain FHA and VA loans are assumable by the buyer. For example, FHA loans originated prior to December 14, 1989 and VA loans originated prior to March 1, 1988 are freely assumable, meaning that the buyer does not need to go through a qualification process. FHA and VA loans originated after those dates are assumable only to qualified buyers, with conditions. In any offer that contains a mortgage assumption clause, it is advisable to consult your attorney, since there are situations (e.g. on non-qualifying loans) where you as seller may still be held responsible for the timely repayment of the loan by your buyers.

Pre-qualified, pre-approved, commitment. What does it all mean?

These are terms you will hear very frequently as a seller, so it is crucial that you understand the difference in what each of the different terms mean.




The buyer has made application for pre-approval only. Income and debt figures have not been verified. A pre-qualification only says that a buyer can afford a specific payment (and therefore a mortgage amount) based on figures they have supplied. A credit check has been run on the buyers. The buyer has made a formal application for a loan. Income and debt figures have usually been verified. A complete credit check has been run on the buyers. A pre-approval will be subject to a satisfactory appraisal on the property in which the buyers are interested. There is final loan approval. All needed documents are usually in hand by the lender. An appraisal has been done on the property. All income, debt, and credit information has been completed to the satisfaction of the lender. Commitment is the last step before closing. It signals that the loan is complete.

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