 TITLE: What Is Seller Financing on a Home? CONTENT: How Does Seller Financing Work?\n-------------------------------\nIn a seller-financing scenario, the seller acts as the lender in the purchase of a home. The lending agreement is between the buyer and the seller, with no bank, credit union or other lender participating in the deal. It's estimated that fewer than 10% of home sellers serve as lenders.\nThe seller does not provide cash to the buyer for the home purchase. Rather, the seller extends credit to the buyer for the purchase, and the buyer makes regular payments to the seller.\nWhile no bank or other lending institution plays a part in seller financing, the buyer and seller often use real estate agents or attorneys to generate the purchase and lending agreements. Among other things, the buyer and seller will need to negotiate the loan's interest rate and length.\nSeller financing can go down one of two avenues:\n*   The buyer receives the title to a house after promising to pay off the loan from the seller. In this scenario, the buyer can sell or refinance the home, but still must make payments under the seller-financing arrangement.\n*   The seller retains the title to a house until the buyer pays off the loan. This means the buyer can't sell or refinance the home until the loan is paid off and the title becomes theirs.\nRegardless of how the seller financing is carried out, the seller frequently requires the buyer to fill out a loan application, go through a credit check and come up with a down payment. In addition, the seller often insists on an appraisal of the home's value and retains the right to foreclose on the home in the event the buyer defaults on the loan.\nAs with any mortgage, you should work to improve your credit score before you begin your home search. Since you won't know whether a seller will perform a credit check (and whether you'll even go this route), you should ensure your credit is in the best shape possible before you apply for a home loan. END