Updated June 03, 2022
A seller financing addendum outlines the terms under which the seller of a property agrees to loan money to the buyer in order to purchase their property. The seller agrees to take either a first (1st) or second (2nd) mortgage on the property at an agreed upon interest rate with payments that are made either every month or in a balloon payment at the end of the term. Once complete, this addendum should be signed and attached to the purchase agreement made between the parties.
Third (3rd) Party Financing Addendum – If the buyer is going to be obtaining a loan through a bank or government insured source (e.g., FHA, VA, etc.).
(Video) What is a Seller Financing Addendum?
How to Write
Download in Adobe PDF, Microsoft Word (.docx) or Open Document Text (.odt).
1 – The Template Previewed Here Is Available In Three Formats
Find the buttons attached to the image on this page. Each of these buttons will give you access to the labeled file version of the document in the preview image.
2 – Give A Summary Of This Addendum’s Purpose In The First Article
The first article, labeled in bold as “I. The Parties,” will seek to define the parties, property, and dates defining the sales agreement. Begin by documenting the name of the Buyer and the Seller on the first two blank spaces (in that order). Each of these names must appear here precisely as they are written in the sales agreement. 
Next, we will focus on identifying the property at the heart of this transaction. Locate the property’s physical address in the sales agreement then transcribe its building number, street, and suite number to the blank space following the phrase “…Property Located At.” Then, supply the City and State where this property is on the next two blank spaces. 
Now, find the effective date listed on the sales agreement and enter it as a month name, calendar day, and two-digit year on to the blank spaces after the term “…Effective Date Of.” 
3 – Deliver Some Specifics Required By This Addendum For The Contract
In “II. Effective Date” document the first calendar date when the terms of this addendum are active using the spaces provided. 
We will need to report some specific numbers in article “III. Mortgage.” Locate the two checkboxes preceding the words “First (1st) Mortgage” and “Second (2nd) Mortgage” then mark the appropriate one to indicate whether the Buyer’s promissory note/purchase money mortgage is the result of a first or second mortgage. 
On the first blank line of this paragraph, report the dollar amount of this portion of the purchase price due to the Seller. Then, use the next available space to document the applicable (per annum) interest rate. 
The next article requiring attention, “IV. Buyer’s Credit Information” contains a blank space where you must enter how many days the Buyer has after the effective date (reported in the second article) to furnish the Seller with his or her credit information (i.e. credit check, employment verification, etc.). 
Locate the available space in “IV. Seller’s Approval” then document the number of days the Seller has to inform the Buyer if his or her credit information has been approved or denied on it. 
4 – Produce Required Financial Information
We will have to address the Seller’s “Financing Terms” in the sixth article. Several checkbox options are presented to define the Seller’s financing method. You must mark the checkbox labeled “Amortized Loan,” “Interest Only,” “Balloon Mortgage,” or “Adjustable Rate Mortgage.” Only one of these choices should be marked, however, keep in mind, whichever one defines the Seller’s financing will also request additional specifics presented. 
Choose the first checkbox, if the Seller desires financing to occur through an “Amortized Loan.” This statement will also require you enter the number of month/years the loan’s terms will remain in effect on the blank space provided. You will also need to mark either the box labeled “Months” or “Years” to indicate which of these increments of time you are reporting this information in. 
If this is an “Interest Only” mortgage loan then mark the second checkbox and report the due date when the entire balance must be paid in full on the blank spaces provided. 
Mark the third checkbox if financing will be done through a “Balloon Mortgage.” If so, then use the first blank space to indicate how long (in months or years) this loan’s term will run and mark the checkbox labeled “Months” or the one labeled “Years.” You must also enter the exact due date when the remaining balance must be paid on the blank lines after the words “…Due In Full On.”
If an “Adjustable Rate Mortgage” is the financing method being used then mark the fourth checkbox of this list. You should have this paperwork handy as you will have to report on its term, interest rate adjustments, how such adjustments are made, and the time frames involved. 
Next, in “VII. Taxes,” mark the check box if the real property taxes will be Escrowed or mark the second checkbox if they will not be escrowed. 
Similarly, mark the first check box in article “VIII. Insurance” if the property and liability insurance will be escrowed or the second one if it will not be escrowed. 
Two checkbox statements have been supplied to “IX. Pre-Payment.” You must mark the first check box if there will be no pre-payment penalty imposed on the Buyer. If this is not the case, then you should mark the second checkbox to indicate the Buyer would be subject to a pre-payment penalty and report what the pre-payment penalty is on the blank space provided in this statement. 
In “X. Late Payment,” use the first blank space to indicate the percentage (of an installment payment) that will be imposed as a penalty when the Buyer is late with a payment. Then, use the second blank space to document how many days after its due date when an installment will be considered late (thus leaving the Buyer vulnerable to the penalty). 
Lastly, in article “XI. Sale Of Property,” mark the first checkbox if the mortgage is due upon the sale of the property or the second check box if it will not be due upon the sale. 
5 – This Addendum Can Only Be Executed By Signature
The Buyer must sign and print his or her name then record the signature date on the blank spaces labeled “Buyer’s Signature,” “Print Name,” and “Date.” Each Buyer listed in the sales agreement must supply these items. 
In addition to the Buyer, the Seller must sign this addendum as well. The “Seller’s Signature,” “Print Name,” and “Date” lines have been supplied so that each Seller can sign and print his or her name then date the signature he or she provided. 