Second Mortgage

There are many ways to describe a seller second in Mortgage Terms.

It means that the seller is willing to carry a second mortgage on the property he is selling.

Moreover, if it is legally stated, it means that the seller will hold the second mortgage. The primary lender has the first and is paid first in case of default. The second has second claim on the property or what is left after the first gets his money. The second then gets paid if there is enough and if not – he is out of luck.

So a seller second mortgage mean the seller holds a mortgage in second lien position. Let’s say you sell the property for $180,000 and the first mortgage is $150,000 and the second mortgage is $20,000.

Under this scenario both first and second mortgages will be paid off. If the selling price was only $150,000 then the second mortgage would get nothing. In mortgage terms the first mortgage is always paid off first, then the second mortgage is paid off.

As long as there is enough equity, the second mortgage holder should be OK. It is advisible holding second mortgage less than 85% Loan to Value. This means the first and second mortgage amounts do not exceed 85% of the value of the property.

Luckily, the real estate market has shifted back to a buyers market (in most areas). It might be more beneficial to talk to a few more lenders. If this will be your first time buying a home, you can potentially receive VHDA financing.

This type of financing will allow you to cover your closing cost expenses (typically 3% of the sales price) and generally is a more lenient loan program. And if you want to look for seller’s second mortgage online, where sellers are offering owner financing? You may not find many and a handful of them are trust worthy.

It is better that you continue to check your local paper and as the market shifts, some sellers may be willing to negotiate with you over certain percentage of your total mortgage or the Value of the Home. 

You can always wait for a few months and build your credit up buy paying down debt and making larger payments ahead of schedule on a consistent basis. Rates may fall down a bit as the real estate market is allowing you to negotiate now.