Seller Financing Undergoes Nationwide Changes

 In Bond for Deed, Newsletter

Seller Financing Undergoes Nationwide Changes

The seller financing regulations signed by Dodd-Frank Wall Street Reform and Consumer Financial Protection Act go into effect this month.  Seller financing plays an important role in financing the sale of real estate, especially when credit is tight making qualifying for a conventional mortgage difficult.  Under the new law an individual, trust or estate may provide mortgage financing for no more than one property in any 12 month period must meet the below requirements:

1. Seller financing for only one property in any 12 month period.

2. Seller owns the property securing the financing.

3. Seller did not construct or act as a contractor for the construction of a residence on the property.

4. Seller financing does not result in negative amortization.

5.  Seller financing has a fixed rate or does not adjust for the first five years.

An Entity or Corporation may provide mortgage financing for no more than three properties in any 12 month period must meet the below requirements:

1. Seller financing for three or fewer properties in any 12 month period.

2. Seller owns the property securing the financing.

3. Seller did not construct or act as a contractor for the construction of the property.

4. Seller financing is fully amortized. No balloon clause allowed.

5.  Seller financing has a fixed rate or does not adjust for the first five years.

6. The seller has determined that the borrower has the reasonable ability to repay the loan according to its terms. (This could include consider earnings as evidence by payroll or earnings statements, W-2s, etc.) The value of the dwelling may not be considered as evidence of the buyer’s ability to repay.

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