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  1. Financing

The stack method.

For a purchase where the primary loan is approved and the seller will carry part of the price, but money still has to be on the table at closing. That closing-day gap is funded, then repaid from the seller carry.

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IHow it works

How the stack fits together.

The seller carry note is only created when the purchase closes, so the cash the first lender does not cover has to arrive on closing day.

  1. First positionPrimary loanUsually DSCR, covering most of the price.
  2. Second positionSeller carryA note from the seller's equity, created at closing.
  3. At closingClosing-day fundingWhat the first lender does not cover: the down payment, closing costs and fees.
  4. ResultOne closingThe funding is repaid from the seller carry, as written into the contracts.
Every lender and closing party must know about, and permit, the seller carry. A carry kept from the first-position lender is mortgage fraud, and is never funded.
Illustration only How the numbers have to line up. Not a completed Oakspire Group transaction, a quote or an offer.
Purchase price
$300,000
Primary loan, 80%
$240,000
Seller carry note
$90,000
Needed at closing beyond the loan
$66,000Down payment $60,000 plus an assumed $6,000 of closing costs and fees, funded on closing day
The test
Funding $66,000 is less than the $90,000 carry that repays itAnd the carry cannot exceed the seller's equity: the price less what the seller still owes on the property
The trade-off
$330,000 of debt against a $300,000 purchase priceUnless the property is independently valued above the price, the buyer starts with negative equity. Suited to experienced investors with income elsewhere, not a first deal.

Not a settlement statement: lender charges, prepaid items, payoffs and the funding fee are left out. When and how the funding is paid back from the seller carry is set in the written agreement and confirmed with the title company or closing attorney before closing.

  1. The primary loan

    Usually DSCR, in first position. Its lender must permit a second-position seller carry.

  2. The seller carry

    A note from the seller's equity, in second position. It cannot be larger than that equity, and its terms are in writing.

  3. Closing-day funding

    Covers what the first lender does not: the down payment, closing costs and fees, so the purchase can close.

  4. Repayment

    The funding is repaid from the seller carry first. How and when is written into the contracts and confirmed with the closing agent before closing.

What qualifies

  • A primary loan, with the lender's details and term sheet.
  • A seller carry larger than the funding, and no larger than the seller's equity.
  • Disclosure. The first-position lender, the title company or closing attorney and the loan documents all permit the carry.
  • A signed agreement: signed contracts, or a signed letter of intent, with the carry terms in writing.

The full document list is on the Financing page.

Not funded

  • A stack with no primary loan. The loan is the base of the stack.
  • A carry the first lender has not permitted. Undisclosed second liens are not funded.
  • Funding larger than the carry. The carry is what repays it.
IIQuestions

Common questions.

Questions about pricing, timing and where your information goes are answered on the Financing page.

What is the stack method?

A way to close a purchase that combines a primary loan, usually DSCR, in first position with a seller carry note in second position. Closing-day funding covers what the first lender does not, such as the down payment and closing costs, and is repaid from the seller carry under terms written into the contracts. The first lender must know about and permit the carry, and the total debt can exceed the purchase price, so it suits experienced investors.

What is a seller carry?

Seller financing for part of the price. The seller accepts part of the purchase price later, through a second-position note secured on the property. In a stack, it is what repays the closing-day funding.

What is a DSCR loan?

A debt service coverage ratio loan is an investment property loan underwritten mainly on whether the rent covers the debt payments, rather than on your personal income.

Does my lender need to know about the seller carry?

Yes. The first-position lender has to know about and permit the second-position carry. Concealing it from a lender whose documents prohibit it is mortgage fraud, and such a deal is not funded.

Loan in place, seller on board?

Send the contract, your lender's details and the carry terms. Also see Earnest money · Double closings.

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