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Ofir, "seller financing" is when the seller holds some or all of the financing. I wouldn't consider what you're describing (seller getting a 2nd and you paying on it) to be seller financing. The only benefit to you in that scenario is that you don't have to qualify for the 2nd mortgage. Which doesn't help much. Whether or not the seller holding a 2nd for your down payment will fly depends on several things: First, if you are taking over the 1st mortgage sub2, then the seller can hold the 2nd without any issues. Second, if you are officially assuming the 1st, the seller usually can also hold the 2nd for your down payment. Third, if you're getting a new 1st, then it depends on the bank and your lawyer. You can qualify for 100% financing where the bank will readily allow the seller to hold a 2nd. If you're not getting 100% financing then it gets tricky. If the house appraises for equal to or more than the total of the 1st and 2nd, then your lawyer can probably swing it. But this is walking the line of mortgage fraud. You need to understand the policies of the lender very well to make sure you don't cross the line. Generally you would be operating on legal technicalities and wording loopholes. I'll give you an example of such a "wording loophole"...
Most lenders require you to sign an affidavit stating that you will occupy the property, in order to get an owner-occupied mortgage. But ask any aggressive real estate lawyer and they'll tell you that the specific wording of that affidavit allows you to occupy the property for 1 day and technically satisfy that requirement. Similar loopholes exist when it comes to 2nd mortgage down payment financing. It's a very gray area and you should venture into it only with the guidance of a very creative lawyer, and a thorough understanding of the law, and the policies of the particular lender you're working with.
Modified by Doug Pretorius at Sun, Feb 27, 2005, 11:40:33
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