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Research has shown that 10% of all home sales involve some kind of seller assisted financing. One significant advantage to this type of financing is the flexibility of terms. However, finding a seller willing to consider this option may take some effort. Keep on the lookout for sellers facing huge capital gains tax; have difficulty finding a qualified buyer; willing to receive income over time with interest; or willing to raise the price to help of financing.

In the real estate industry, when a seller is willing to sell you a home in installments, it's called seller carry back. Upon closing of your sales transaction, the seller will transfer title of the home to you in exchange for a promissory note stipulating your obligation to a mortgage payable in monthly payments. The notes will also provide for a lien on the property in favor of the seller until you pay off the loan. It's not uncommon for seller financed deals to include a balloon payment after a few years. Once this happens, you'll want to consider refinancing the loan or selling the property. Sellers who own the property without any liens and encumbrances are perfect candidates for this type of financing as they won't need to pay off the mortgage loan upon the sale.

In situations when you don't have enough funds to match the sales price, you can arrange for seller financing to make up the difference. This option also helps you save money because the interest rate will be less than regular secondary financing.

If after weighing all these alternative, you still decide to select seller assisted financing, you'll have to put together a thorough file showing your income, credit history, employment history, and personal references before you negotiate with the seller. If you can get the seller to provide this type of financing, you'll benefit from terms that are more flexible. Some terms to consider include:

1) Better interest rate

2) Small initial payments

3) Buying down the loan rate

4) No prepayment penalty

5) Postponing the balloon payment for five years or the right to extend the home loan if circumstances make it difficult to qualify for refinancing or if you're unable to pay the balloon payment in its entirety.

6) The right to allow another qualified homebuyer assume the second loan if you decide you no longer want to reside in the property.

Be selective in the terms you want to negotiate, otherwise the seller will refuse to cooperate with you. Don't budge on those terms which are vitally important to you but be negotiable on other less important terms.