Seller financing is carried most commonly in one of two ways.
Seller Takes Back Mortgage
The first is for the seller to take back a mortgage on the house. The buyer signs both a promissory note (promising to repay the loan) and either a mortgage or a deed of trust (allowing the seller to foreclose if the buyer fails to pay). In return, the seller signs a deed transferring title to the buyer. Because the buyer holds the title, the buyer can sell the house or refinance, but the buyer must keep making the agreed-upon payments to the seller. This technique is used on properties that the buyer wants to live in or sell and offers the buyer a lot of flexibility and options. It most commonly occurs when the seller owns the property outright.
Seller Keeps Title to Property
The second and less popular way is for the seller to keep title to the property for as long as it takes you to pay off the loan. The contract the buyer and the seller sign is known by various names, including contract for deed, contract of sale, land sale contract, or installment sales contract.