Seller financing helps many buyers purchase their first homes. But, there are definitely some drawbacks to this method.

Here are some of the most important seller financing risks to consider:

• Non-payment of original mortgage. If you take out a wrap around mortgage, the seller must continue making his own mortgage payments each month. If he stops paying the original lender, you may lose your property through foreclosure.

• Original lender calls the loan due. Some sellers offer financing despite a “due-on-sale” clause in their original mortgage. In this case, if the bank finds out about the sale, it may choose to require full payment in just thirty days. Someone will have to come up with a significant amount of money in a very short time. If not, the house may be taken via foreclosure. Even if the bank chooses not to require payment, they may demand an increased interest rate or additional principle. The seller may want to pass those expenses on to you.

• Undisclosed liens. If the property has liens that you are unaware of, you may end up being liable.

• Ownership issues. The buyers name is generally put on the title when a seller financed deal goes through. However, this is not always the case. If your name is not on the title of the property, you may have trouble proving your ownership.

• Balloon payments. Some sellers require a massive balloon payment after just a few years. In such a case, you would need to find another way to finance the property or risk losing it.

• Documentation trouble. If your seller financed mortgage is not going through a loan servicer, you may have to rely on the seller to provide you with the necessary documents for proving homeownership. If he doesn’t take this task seriously, you may have trouble when filing taxes and completing other legal tasks.

If you’re worried about any of these issues, talk to a real estate attorney for a professional opinion on your situation. You may also be interested in: Seller Financing Benefits.