buyer can't get a conventional mortgage and is asking about seller financing on my $480k house. they offered 10% down and a 6% interest rate over 15 years. interest rate's better than i'd get parking the cash. is this a terrible idea?
the catch: if buyer defaults you have to foreclose. judicial foreclosure is slow + expensive + buyer can damage the property in retaliation. and 10% down is RISKY — if home values drop they'll just walk.
standard seller financing terms: 20%+ down, full amortization with balloon payment in 5 years (so you can renegotiate or force a refinance), Dodd-Frank compliance if buyer is consumer.
also: dodd-frank requires that for owner-occupied residences, the seller can't be a licensed loan originator AND must verify buyer's ability to repay AND can't have a balloon. complexity hurts. consult a real estate attorney before signing anything.
my 2 cents: if buyer can't qualify for a regular mortgage there's a reason. the 6% you're getting is risk-adjusted compensation, not a gift. due diligence the buyer hard.