The seller is willing to carry part of the price. You want a bridge or DSCR loan for the rest. Here is how a seller second fits behind an investor loan, and where programs draw the line.
In short: Many bridge and DSCR programs allow a seller carry second behind a first-position investor loan, but the rules vary widely. The seller note usually must be subordinate, fully disclosed on the contract and settlement statement, and kept within a combined loan-to-value limit. Some programs also require a minimum amount of your own cash in the deal, and some do not allow secondary financing at all.
The first-position loan is the bridge or DSCR loan. It is recorded first and gets paid first if anything goes wrong.
The seller note sits in second position. It is a recorded lien too, but it agrees in writing to stand behind the first. Your cash covers the rest of the price and closing costs.
Sellers agree to this for different reasons: a faster sale, a higher price, spreading out taxes on their gain, or steady interest income. Knowing their motive helps you negotiate terms that also satisfy your lender.
This example is illustrative. You are buying a small rental property for $500,000 with a bridge loan. The program allows secondary financing up to an 85% combined LTV, as an example limit.
| Structure | First loan | Seller second | Your cash | Combined LTV |
|---|---|---|---|---|
| A: works | $375,000 (75%) | $50,000 (10%) | $75,000 (15%) | 85% |
| B: too high | $375,000 (75%) | $75,000 (15%) | $50,000 (10%) | 90% |
| C: no seller note | $425,000 (85%) | $0 | $75,000 (15%) | 85% |
Structure A fits the example limit. Structure B puts more of the price on the seller and pushes combined leverage to 90%, so many programs would decline it.
Structure C shows the alternative. With up to 85% LTV available on bridge, a seller second does not always reduce your cash. Its real value is often softer terms or a lower first-loan balance.
A smaller first loan means a smaller monthly payment and less interest during the bridge period. If the seller note is interest-only at a modest rate, your total carrying cost can drop meaningfully.
Bridge programs are often more flexible about seller seconds because they are short-term and focused on the exit. A seller note that is interest-only and due when you refinance or sell can fit neatly.
DSCR programs tend to be stricter, since the loan runs for decades. Some include the second payment in the DSCR, which can make the rental fail to qualify. If you plan to refinance into DSCR later, check now how the seller note will be handled at that point.
Every lender has to know about a seller note. An undisclosed second lien misrepresents the deal and can create serious legal problems for both buyer and seller.
Put the terms in the contract from the start. Have a real estate attorney draft the note and subordination agreement so they line up with the first loan’s requirements.
Seller seconds are where program rules differ most. One source caps combined leverage tightly, another allows more, and a third will not touch it.
Send us the price, the seller’s proposed terms and the cash you plan to bring. Our financing team can bring you 2–3 options and tell you which structures are likely to be approved.
Often, yes. Many bridge and hard money programs allow a subordinate seller second, subject to combined LTV limits and disclosure requirements.
Some DSCR programs do, but they are usually stricter. The seller note payment may count in the DSCR, and some programs do not allow secondary financing.
It is a signed document in which the seller agrees that their note stands behind the first-position loan. Programs that allow seller seconds typically require it.
Usually not. Most programs require some of your own cash in the deal and limit combined leverage, so a 100% financed purchase rarely fits.
It depends on the note terms and the new program. Many investors pay the seller off at refinance, while some DSCR programs may allow the second to stay if it is resubordinated and fits their limits.
Yes, always. Seller financing must appear in the purchase contract and closing documents. Hiding it misrepresents the transaction.
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