How a Balance Transfer Could Lower a FICO Score: Interest-Free Credit Card Transfer without Hurting Your Credit Score


Consumer debt has risen sharply over the past decade. The Nilson Report showed that the median credit card debt stood at $10,679 at the end of 2016. Not surprisingly, this has led many U.S. consumers to turn to interest-free credit card transfers in order to reduce any outstanding personal debt.

A balance transfer performed incorrectly could damage a FICO score and make other borrowing sources, such as home equity loans, less affordable. It is important to establish the correct approach to reduce interest payments on credit card debt in order to protect a personal credit score.

What Does an Interest-Free Credit Card Transfer Involve?

After using a comparison site to trawl the market, select the best credit card deal. An interest-free credit card transfer or a transfer at a low rate for the life of the balance is most preferable. Select the right card, provide all the requested information, enter the balance transfer details and the FICO score will be checked by the lender. The new card provider will carry out the balance transfer. It will take a few weeks to take place and most lenders charge a transfer fee of approximately 3%.

How Not Making Interest Payments Helps to Clear Credit Card Debt

A consumer has $10,000 of credit card debt at 15% APR. An interest-free credit card transfer fee of $300 will be added to the amount owed. However, after a period of 12 months, the balance transfer will help save $1,200 in further interest payments. This gives a consumer the opportunity to reduce personal debt.

Why Does a Balance Transfer Reduce a FICO Score?

  • Each credit search is recorded and will cause a credit score to go down slightly.
  • A balance transfer from a card with a high credit limit to one with a low limit will negatively affect a FICO score. Provided that the consumer pays-down the level of credit card debt, a FICO score will recover within a few months.

Interest Free Credit Card Transfers May Soon End

President Obama changed the law with regard to the application of card fees and charges. Credit card debt is no longer the cash cow it once was which means that balance transfer deals will shortly become fewer in number. Providers have traditionally banked on the fact that they were able to apply fees and charges to client balances for making late payment. They have enjoyed the complete freedom to increase the rate of APR on a balance at any time. Neither of these will be possible from February 2018.

* Legal changes were introduced by the Credit Card Accountability, Responsibility and Disclosure Act.

It is sensible to take advantage of interest-free credit card transfer whilst they are still available to consumers. Always pay-down the debt if transferring from a card with a high to a low credit limit in order to ensure that a FICO score isn’t negatively affected. Balance transfers normally involve a fee of 3% which will increase the level of personal debt in the short term.

Consumer Credit and Debt Counseling: Receive Financial Help and Learn Essential Economic Instruction


In the current economy, more and more people are facing debt issues. Debt is piling up and many people no longer have the appropriate means to handle the situation. Many consumers are reluctant to ask for professional financial help, and insist on handling the situation by making private financial adjustments.

Sadly, if an individual is in moderate or severe debt, imposing personal economic restriction rarely succeeds. Due to this issue, when a consumer finally turns for professional help to address debt concerns, the problem has become critical and paramount.

When fiscal hardships can no longer be handled in a proper fashion, consumer credit and debt counseling can provide relief as well as essential financial education.

Credit Counseling

The job and objective of a credit counselor is to look over an individual’s entire financial history. Credit counselors not only review debt, but income, expenses, and personal finances as well. Using the entire financial picture, counselors are able to determine the proper credit solution for an individual’s situation.

Credit counselors will also discuss the consumer’s credit debt with that individual’s credit card company. This process allows the credit card companies to possibly lower the interest rates so the individual in question can pay off debt in a sensible fashion.

Debt Management Programs

When a consumer becomes enrolled in a debt management program, all of that individual’s debt is entered into the program and all credit is halted. The individual is also forbidden from applying for additional credit. This process allows the “brakes” to be applied and the consumer can focus on paying off the mature debt rather than accumulating new financial difficulties.

In the debt management agenda, the consumer makes a monthly payment to the debt management counseling service. The counseling service will then compensate the creditors.

Debt Settlement Plan

When an individual doesn’t qualify for a debt management program, debt consolidation is always a recommended option as well as the idea of debt settlement. In the debt settlement process the counseling service will consult with the individual’s creditors for a reduced balance.

Debt settlement allows the individual to pay the reduced balance instead of the original balance. Debt settlement is usually the last debt counseling option and is usually reserved for those in very large debt.

Live Debt Free

When a consumer takes advantage of these debt recovery options he or she can regain financial stability. Through the consumer credit and debt counseling process an individual can learn better spending habits and money management skills.

How to Pay off Your Debts: What to Do in Order to Become Debt-Free


The following is a guest post from Brabble Director of Business Development Patrick Mackaronis.

There is no magical way to get out of debt. It requires careful planning, sticking to a budget, consolidation of debts, and then calculating the best order in which to pay them off.

Controlling Expenses by Sticking to a Budget

In order to control expenses, one must first know what they are. So the first step is to record everything that is being spent. This is difficult to do, but quite possible. The individual should then work out where money can be saved, perhaps on food by shopping at cheaper supermarkets, or on fuel bills by changing supplier. Money can be saved on things like car insurance and home insurance by shopping around, and every little bit saved can go towards making you debt-free.

Consolidating Debts

All debts have different interest rates. Many people have a great deal of credit card debts at a high rate of interest, because over-spending on credit cards is so easy. Bank loans, on the other hand, have a much lower rate of interest. If possible, get a relatively low interest loan, and use it to pay off the credit card and other high interest debts.

What Order to Pay off Debts – the ‘Debt Snowball’

The ‘Debt Snowball’ is the tried and tested way of paying off debts – and it works.

Basically one pays off the debts with the highest interest rate first. The individual first needs to list all their debts in descending order of interest rate, regardless of the balance. Determine the most money you can make available from your budget to pay off debts, and apply that to the debt with the highest interest rate. As soon as one does that, the amount owing will be reduced. The next month, the individual pays off the same amount of the debt with the highest interest rate. On all other debts, continue to make the minimum payment.

When the first debt is paid off, continue the process with the debt with the next highest interest rate. At all times, stick to your budget, and continue to pay off the same amount each month.

As the individual continues to do this, the amount of interest gradually reduces, and more money is being used to pay off the actual debt, ie the process ‘snowballs’.

Various websites provide online Snowball calculators so that the individual can see for himself how the process would work for him.

If a person follows the above process, he or she can become debt-free in a surprisingly short time. It is not easy, but the main things that are required are planning, self-discipline, and organization. It can be done!

How to Use the Certificate of Deposit to Save: Are Certificates of Deposit (CDs) Worth Investing Spare Cash in?


Many people look to build up some savings in case they need them in the future. Standard savings accounts may not give fantastic returns and many will invest their savings in one or more certificates of deposits (CDs) as an alternative. How do these products work and are they worth it?

What is a Certificate of Deposit?

This savings account, like any other traditional deposit account, is designed to give the individual a return on their investment by paying them interest. The difference between CDs and other savings alternatives is that the individual will commit to tying up their savings for a set period of time with the issuing bank or brokerage.

This gives the individual the potential to earn more interest. They may, for example, invest a fixed sum in a CD to get a specific rate of interest that is paid according to the CD’s schedule. Investment periods vary here but will typically last between 3 months to 5 years. Once the product has come to an end the individual can take their cash out or keep it in the account for another term.

The Advantages and Disadvantages of Investing in CDs

For many, certificates of deposit are the primary way to invest their spare savings. The advantages of using standard CDs for the individual include:

  • Higher rates of interest compared to standard deposit accounts.
  • Lower risk than many other investments as their principal investment is secure as long as they stick to the terms.
  • Increased security as federal deposit insurance protects these investments to the tune of $250,000.

It is important to consider all relevant factors, however, before using this kind of investment. So, for example, the individual should be aware that:

  • They may lose interest and perhaps some of their principal in penalty charges if they don’t stick with the term of the CD and want to take their money out early.
  • They may not see the kind of high investment returns that may be found with other investment products.
  • Some products may be available on a national basis but some may be reserved for local investors.

There are also various types of certificates of deposit to choose from within the financial sector so it is important to investigate the terms and conditions before investing. Whilst traditional products will give a fixed rate of return for their investment period others may offer variable rates and different terms that may make investment a little less secure.

Bear in mind as well that shopping around to find the best investment deals may be worth doing. Interest rates and deals may vary widely and using a CD yield rate comparison site or service online may give a quick snapshot of the best options in terms of returns. This may also be useful if the individual is looking to set up a CD laddering strategy.

House Stripping Common With Foreclosed Homes: What a Person Can Take From a Home After a Foreclosure

The following is an article by Natural Resources Management president Tracy Suttles, a figurehead in the Houston, Texas real estate development scene.

An individual facing foreclosure is only allowed to remove certain items from the home prior to vacating the premises. Removing unapproved items from a foreclosed property is known as “house stripping”. Many former owners engage in house stripping without ever realizing that the practice is illegal.

What A Former Owner Can and Cannot Take From the Home After Foreclosure

Many former owners are under the impression that if they purchased an item and installed the item in the home, they have the right to uninstall the item and take it with them when they leave. This is not the case. The removal of any item that directly affects the value of the home is considered house stripping at best, at worst, defacement of bank property. The former owner is free to take the following items:

  • Personal belongings
  • Unattached appliances (blender, coffeepot, etc.)
  • Garden equipment
  • Furniture
  • Unattached storage buildings

Items that cannot be removed include:

  • Attached appliances ( I.e. dishwashers, stoves, etc.)
  • Built in furniture
  • Carpet or flooring
  • Doors
  • Home fixtures (chandeliers, door knobs, fans, etc.)

Home fixtures and attached appliances may be taken by the former homeowner provided that the individual provides and installs a functional replacement.

House Stripping May Be Considered Defacement of Bank Owned Property

Because taking items such as carpets and doors reduces the value of a home, the bank may not be able to sell the home for enough money to cover the outstanding balance of the former owner’s mortgage loan. Any potential buyers will see the job of replacing flooring or repairing extensive damage done to the home when built in furniture or shelving was removed, as an added cost. The home will be less appealing to buyers and thus sometimes cause a significant financial loss for the bank.

Although this is the intent of some angry former homeowners, many individuals do not realize that when they pack up their new dishwasher and the custom fans they purchased for the bedrooms they are actually defacing bank owned property. They believe that because they purchased it, it belongs to them. Once a fixture or appliance is installed in the home, however, it must stay with the home following a foreclosure unless the former owner elects to replace the item.

Legal Consequences of House Stripping

In 2008 in the town of Sharpsville, PA a man by the name of Scott McCusky was tried and convicted for stripping his home. A local newspaper ran the story along with the verdict–that McCusky pay $174,000 in restitution to the bank and serve 3-15 months in the county jail.

In yet another piece, The Chicago Sun Times ran a story concerning house stripping and its consequences. According to Patrick Zomparelli, a Chicago realtor, some banks are offering homeowners money to leave peacefully without damaging the property.

Although house stripping is illegal, it can be difficult to prove that the act was done by the former homeowner and not thieves or vandals preying on an empty house.

Tracy Suttles can be reached on Twitter at @tracydsuttles.

Student Guide: Managing your Loans and Finances

Managing your Student Finances

Going to university (or college) can be a liberating experience. No parents to tell you when to get up in the morning, or teachers to give you detention when you don’t get your work in on time. However, it’s easy to fall into this hedonistic lifestyle of partying all night and sleeping all day and spending all your money in the process.

You wouldn’t believe how many institutions will be falling over backwards to loan you as much money as your beer belly desires. The banks will throw overdrafts at you and there are more loans and grants than you can shake a stick at.

Be warned however, although it seems so at the time, this is not free money, and you will one day have to pay it all back. So with that in mind, here are a few tips to help you keep those finances in order.

The Banks

When you head to the fresher’s fair, you find every bank under the sun, advertising their ‘new’ amazing student offer; a free toaster, puke bucket and young person’s bus pass for every new account and an overdraft that will pay for your new Nintendo Wii AS WELL AS 204 nights on the lash.

At this stage, the banks may seem all sweetness and honey, but the moment you are no longer enrolled they’ll come after you gnashing their teeth like hungry piranhas. Therefore it’s best, if you can possibly manage it, to steer clear of your overdraft. Of course you might use a few pennies in times of starvation, but look at more as a last measure than a luxurious freebie.

Student Loans

The ludicrous bureaucracy that accompanies the process of applying for your student loan is tedious and tear-your-hair-out irritating, but unless your parents bathe in rivers of gold, your loan is likely to be essential. The Student Loans Company website is where the magic happens, and it’s worth taking the time to familiarize yourself with the site before sending off your form as the slightest mistake could mean an extra month of living on leftovers.

The loan is low interest and you don’t have to think about paying it back until you’re earning at least £15,000 per year. Having said that, the monthly repayments are noticeable so it’s worth saving as much as you can. If you do take a student loan, which the vast majority of students will, then you’ll find yourself paying for it later. Loans are means-tested, but you can expect £1,200 three times per year (barely enough to cover the rent).

Student Grants

Brilliant. If you happen to be over 21 our generous government will afford you and extra £2,500 or so each year which you DON’T have to pay back. This grant is essential if you don’t want to spend every waking minute outside of University working in Uncle Joe’s Kebab Parlour, however, although it may sound like a lot of money it really doesn’t go far. It is just about possible to live off your loan and grant, but finding a job is an excellent way of subsidising your partying habit.


Most University’s offer means tested bursaries to help students who come from low income families. They’re quite sneaky about these and you’re unlikely to hear about them until late on in your first year, so as soon as you arrive at Uni, it’s worth popping down to the main office, or the Student’s Union and asking someone the best way to apply for bursaries. Bursaries can mean an extra £1,200 each year.

Most students are likely to spend their University lives without two pennies to rub together, but they’ll have a great time nevertheless. The problem for students, in terms of their finances, is lack of foresight. With just a small amount of planning, perhaps a part time job, and researching the right institutions, students are likely to enter the big bad world in much better financial health.

Student Finances Need Not Be a Minefield

Students are increasingly finding it expensive to get a college or university education with increased tuition fees and living expenses. Thinking about student financing can also be time consuming and requiring extensive research to get the best deal and finance package to suit the student’s needs. For those students who feel they can put off thinking about financing for “later,” they may just find they make decisions which can be costly for them.

Being a student can be a very memorable period of an individual’s life, but it can also be a time when the student is constantly thinking about student financing and mounting student loan debts. A student need not be broke all the time, and carefree student days also need not be relegated to history. Instead, with a bit of financial planning, a student can have a good time without worrying about incurring large student debt.

There are institutions that are ready to help a student look at his/her financial requirements and compile an appropriate finance plan. Students who are fortunate to have financial support from parents could also benefit from obtaining additional information. However, for the majority of students heading off to college and university, the issue of student finance and student loans becomes a looming reality.

Student Debt

Going to college or university may well be getting more expensive, but it is also becoming a requisite for many students. Many believe that getting a degree or vocational qualifications will enhance their prospects in a competitive and increasingly global job market. However, this desire to undertake studies comes at a price which increases each academic year.

According to Changeboard, more than 50% of all graduates in the USA will have student loans totaling $20,000 by the time they graduate. This statistic is reaffirmed by The National Centre for Education Statistics, who reports that two thirds of all College students have student loans after graduation with an average of $19,237. Additionally, a quarter of undergraduates borrow more than $25,000 and one tenth borrow more than $35,000

In the UK, the picture is reflective of the changing times in the UK education system. According to university research organisation Push, the average student graduating in July 2017 will find themselves with nearly £22,000 in debt. Many will be paying student loans well into their 30s and in some cases, even into their 40s.

Planning student financing can help to manage student debt better. Many students are now coming out of colleges and universities with increased levels of debt and are starting their working lives saddled with debt they incurred as students.

For many students, working part time and studying full time has become the norm, despite protestations from professors and other teaching staff. Teaching staff believe that holding down working commitments impacts the grades and overall learning experience for students.

Sources for Student Funding

The following highlights potential sources of funding for students

  • Private student loans (account for nearly 25% of all student loans in the USA)
  • Federal Student loans
  • College scholarships
  • Parents and friends
  • Personal savings
  • Working during studies
  • Charities
  • Religious institutions
  • Bursaries
  • Employer sponsorship for vocational and further degree qualifications
  • Global institutions like the Soros Foundation, World Health Organisation, AMIDEAST, and the United Nations

Where scholarships are concerned, the student may find that s/he may need to submit and an essay or other written pieces of work. Each institution awarding a scholarship will have the necessary details and background and qualifying requirements.

The onus falls upon the student to get the best student financing information and deals. Therefore, planning and preparation is imperative, even though the student may be tempted to leave this to the last minute. The downside of leaving financial planning for studies to the last minute will mean decisions will be made in haste and may not serve the student in the long run.

College Loans

Further information for students in the USA and UK can be found below:

  • Student Federal Loans
  • The Student Aid website also contains a checklist for prospective students and their parents
  • Direct Consolidation Loans

Information on student financing in the UK can be found from the following sources:

  • Student Loans Company
  • Direct Gov

There are many financial companies offering cheap student loans, but as a word of caution, students pursuing this option may be best advised to read the small print before signing on the dotted line.

As the student population continues to explode globally, so will the number of financial and non financial, reputable and non reputable companies offering an array of financial services and products to the student market. A student who engages in financial planning, research and preparation will be the one who succeeds in the long run.

Student Finance England Loan Deadlines 2016/17: When Students Should Apply for Non-Means Tested & Income Based Loans

Students planning to start or resume full-time courses at colleges and universities for the 2016/11 academic year may find it useful to apply for Student Finance England loans earlier rather than later. Those that hit government deadlines will stand a far better chance of being paid their loan on time for the start of term. What are the deadlines for student finance this year?

Student Finance England Deadlines for Non-Means Tested Loan Applications

If a student is making an application for finance that doesn’t need to be means tested then they are being asked to apply by the 23rd of April 2016. These applications are based on circumstances where the parental/household income will not need to be checked during the loans process.

Student Loans Applications That Will be Based on Income Assessment

If a student is making an application that will be means tested then their application date is the 21st of May 2016. The finance given here may be based on the income of the household.

What do the Student Finance Application Deadlines Mean?

The recommended deadlines are based on giving a better chance that a loan will be paid in time for the start of the student’s academic year. There may be, as was evidenced in recent years, no guarantee that finance will be processed on time but hitting the deadline may give the best chance of this happening. Applying later may delay the payment process.

Should Student Loan Applications be Made Through Student Finance England, Student Finance Direct or DirectGov?

Online applications are now initially made via the government’s DirectGov website. Students can also download a paper-based application from the site’s student areas if they prefer not to apply via the Internet.

The official name of the UK’s student loans company has now changed from Student Finance Direct to Student Finance England. The base organisation remains the same and any student that has applied for a loan previously can use the same details for new applications.

What if the Student Hasn’t Been Offered a Place Yet?

The DirectGov website recommends that students try to meet the application deadlines even if they haven’t got a firm offer of a university or college place yet. Students can simply enter their first choice on the form and change it later if necessary.

Using a Student Finance Calculator May be Useful

Those that are unsure how much finance they may be qualified to be given can use the DirectGov student finance calculator. This gives an estimate (but not a guarantee) of options including student loans, grants, scholarships and bursaries. This may be worth doing to help assess income before starting college.

General Money Management Tips for Students

Those about to leave home to study for the first time may need to set up financial accounts and to think about budgeting their money. Choosing the best student bank accounts and other financial products such as credit cards can help with this process. Thinking about how they will manage their money at university may also give them a good start.

Using Student Loans to Finance the High Cost of Student Loans

According to the National Postsecondary Student Aid Study, sixty-six percent of all undergraduate students received some sort of financial aid for the 2013-2014 school year and thirty-eight percent took out an average of $7,100 in student loans. Parents of some of those students borrowed an average of $10,800 in Parent PLUS loans. Borrowing those amounts over a period of four or five years adds up to a heavy debt load for a new graduate. Students should carefully explore all available sources of financial aid and realistically assess their ability to repay any loans.

Federal Student Loans

Federal loans offer the best deal. The government charges lower interest rates than private lenders and most federal loans don’t require a credit check. Federal student loan interest rates are the same fixed rate for all loans made under the same program (e.g., subsidized, PLUS) for a particular disbursement period.

The Department of Education’s Federal Direct Loan Program options include subsidized loans, unsubsidized loans, and PLUS loans. Subsidized loans are made based on financial need and don’t accrue interest while the borrower is in school, during the grace period after graduation or during deferment periods. Unsubsidized loans don’t require a demonstration of financial need, but interest is charged from the time the loan is made. Parents and graduate students can obtain PLUS loans if they meet the program’s credit underwriting criteria. Like unsubsidized loans, PLUS loans do not include any interest free periods.

Prior to 2010, the federal loan program allowed private lenders to originate federally guaranteed student loans. The Student Aid and Fiscal Responsibility Act made the Federal Direct Loan Program (“FDLP”) the sole source of all federal student loans.

Private Student Loans

Because they lack a payment guarantee from the government, private lenders charge higher interest rates than FDLP loans and borrowers must satisfy credit and other underwriting requirements. Private student loan interest rates are determined by adding the prime rate or LIBOR to a risk margin based on the borrower’s credit rating. Students (and their parents) should avoid private student loans unless savings, scholarships, grants and federal loans won’t pay all education costs.

Student Loan Consolidation and Repayment

After graduation, federal loan borrowers have ten years to pay off their loans with either fixed equal monthly payments or graduated monthly payments that increase every two years. Those with more than a minimum total amount of Direct Loan debt  can qualify for a twenty-five year extended repayment term.

FDLP also offers an income contingent repayment plan that calculates payments based on the borrower’s adjusted gross income. Some borrowers can even get a discharge of any remaining debt if the income contingent repayment plan payments are not sufficient to pay off the loan within 25 years.

A federal loan consolidation combines one or more federal loans into a new loan. The monthly consolidation loan payment may be lower than the total of the monthly payments on the loans before consolidation. Unfortunately, the Direct Loan Program will not consolidate federal loans with private loans.

For private loans, repayment terms usually range from ten to twenty-five years. Some lenders allow students to defer all payments of principal and interest until six months after graduation. Other loans collect interest only payments while the borrower is enrolled in school or require immediate principal and interest payments.

Advanced planning, research and budgeting can help students avoid surprises and undue hardship after graduation. The Direct Loan Program and other sources publish resources to help with the process. Many websites also include a student loan repayment calculator that estimates future monthly payments.

Top Reasons Why Owners are Refusing Seller-Financed Mortgages

Why would an owner refuse any offer in today’s market when homes are on the market for months or years at a time? Why would the term seller-financed mortgage cause fear and hardship to a seller faced with losing his home? The top reasons owners are refusing seller-financed mortgages are alienation clauses, common sense, insurance policy complications and fear of appraisal problems.

Word of mouth or previous experience will show many sellers the problems involved in handling loans or mortgages on their own. Seller financed mortgages or land contracts may cause more harm than good to sellers and buyers alike.

The Difference Between Land Contracts and Seller Financing

Land contracts and seller financing are the same thing. Years ago the phrase “land contract” was established to help buyers qualify for a home loan easily by allowing the seller to be the bank or mortgage company. This occurred when interest rates were sky high and qualifying for a loan was near impossible for many homeowners.

Problems arose when there was poor understanding of how to handle a land contract properly. Many sellers were sued by the banks and by the purchaser of the property. At first the whole concept of land contracts seemed to be an easy answer to helping both buyers and sellers in selling and buying homes.

When deals went sour, the use of “land contracts” was eliminated and more and more turned to banks that had become easier to deal with when applying for a loan. In the 1990’s again loans were tight and banks were turning away qualified buyers. So to rectify this problem, the new term “seller financed mortgages” was adopted with smarter escrow companies and experienced Realtors.

What caused such huge problems in earlier years with the “land contracts” had now been rectified with smarter Realtors who realized where their predecessors went wrong. They now knew how to protect their clients and covered all the side effects of such dealings, so they thought.

What is Alienation and Due on Sale Clause?

The top reason sellers are refusing offers for seller financed mortgages is due to the “alienation or due on sale clause” in their mortgage contracts. This clause states that if the owner or seller of the property ever transfers the home without the bank’s authorization, the bank has the right to call the entire note due and payable.

This is also the main reason “land contracts” failed years ago. Sellers and buyers had no knowledge of such a contingency and thus allowed the buyers to call the bank to check on the mortgage being current. The banks then realized the property had been transferred and realized they were losing lots of money. At this point the new clause was added to mortgage contracts called “alienation or due on sale clause.”

Insurance Policies Must Remain in Seller’s Name

The insurance policy must remain in the seller’s name due to the fact that all new policies must go to the mortgage company. Once the mortgage company received a new policy with the new buyer’s name on, the bank called the loan due and exercised their right in the “due on sale clause.”

Once the insurance policy stayed in the seller’s name, the owner or seller must accept responsibility for all losses and claims on the property. The owner or seller must claim that he was present when the destruction or accident occurred, thus causing further liability.

Common Sense in Offers for Seller Financing

Another reason for owners turning down a seller financing deal is pure common sense. If the buyer is offering a large down payment and large monthly payments, then why can’t the buyer qualify for a conventional type loan? Poor credit and high debts may cause the buyer to default on any type mortgage. It is imperative that the seller screen the buyer thoroughly before accepting any type of seller financing.

A $10,000 down payment will not cover legal fees to evict the tenant from the home. Even if escrow papers stipulate eviction procedures after 30 days, removal of the buyer may be very difficult. Having proper representation and knowledge of current mortgage rates may save future headaches in this type of transaction.

Fear of Appraisal Values in the Future

With prices falling and banks refusing more and more loans, it is quite possible that appraisals will not match sales prices next year or five years from now. The fear that the appraisal will not come in may cause many owners to refuse such offers which include seller financing as a contingency.

In seller financing contracts the seller or owner agrees to sell the home to the buyer for ever and never require refinancing of the property. The buyer however has the right to refinance at any given time. Should the buyer decide to refinance on his own to avoid a higher interest rate and payment, he may run into appraisal problems.