What does "seller financing" refer to?

Seller financing refers to a financial arrangement in which a seller allows the buyer to make payments directly to them instead of securing a mortgage through a traditional lender like a bank. In this scenario, the seller takes on the role of the lender, facilitating the transaction and typically charging interest on the owed amount. This can benefit both parties: the seller can sell their property more quickly and affordably, while the buyer might bypass some challenges found in traditional lending processes.

Other options do not align with the definition of seller financing. A mortgage provided by a bank involves a third party and does not include direct payments to the seller. A traditional lease with an option to buy is a rental agreement with the potential for purchase but does not involve direct financing from the seller. Finally, a loan where the seller becomes the legal owner doesn't accurately represent seller financing, as the seller retains ownership of the property while providing a method for the buyer to pay over time.