Finance
What is 'seller financing' and when might it be used in a Hawaii real estate transaction?
AA. A program where the state provides financing to sellers for property improvements
BB. An arrangement where the seller acts as the lender, accepting a note and mortgage from the buyer instead of receiving the full purchase price at closing✓ Correct
CC. Financing arranged by the seller's real estate agent
DD. A fee paid by the seller to the buyer's lender
Explanation
Seller financing (owner financing) occurs when the seller accepts a promissory note and mortgage from the buyer rather than requiring full payment at closing. It can be used when buyers cannot qualify for conventional loans, when the seller wants income, or when market conditions favor creative financing.
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Key Terms to Know
Promissory Note
A written promise to repay a loan under specified terms — the borrower's personal financial obligation in a real estate transaction.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Deed of TrustA security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.
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