Disclose the seller note—or risk loan fraud

Loan servicing. You don't have to, but a third-party servicer can collect and process monthly payments and send statements and maintain the payment history record. This keeps the relationship between the buyer and seller professional and removes any ambiguity about whether payments were made and when. Typical cost on something like that is $25 to $50 per month, but it's worth every dollar. Disclosure to the bank. The seller note must be fully disclosed to the first lender before closing. An undisclosed junior lien is a material misrepresentation on the loan application. So disclose it upfront, provide the subordination agreement, and confirm the bank's approval of the structure before you go to close. Do it early in the process too.