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selling a mortgage note, sold home

The Top 5 Reasons for Selling a Mortgage Note

In this blog space, we’ve previously covered the most common reasons for selling a mortgage note or promissory note, as well as the reasons why that note may be sold at a discount. Selling a mortgage note, discounted or not, is an extremely easy process, as long as it’s handled by a professional service company such as American Equity Funding. Attempting to sell a mortgage note without the advice of an industry expert, however, could prove to be not only messy and confounding – but costly. Tax implications, legalese, and compounding interest rates all add to the uncertainty of selling your note on your own. Call American Equity Funding today to take your mortgage note sale from stressful to stress-free!

So, in order to begin to understand selling your note better, let’s take a step back. American Equity Funding has given the basics on selling mortgage notes, but we skipped past another essential question: Why would one wish to sell a mortgage or promissory note?

The answers may surprise you. Many times, the reasons for selling a mortgage note are much more straightforward than you might think.

Divorce

Unfortunately, divorce has become as much a part of life as marriage. According to the American Psychological Association, nearly 50% of all couples married in America eventually file for divorce. Before this happens, however, many couples invest in property conjointly to simultaneously increase their net worth while also increasing the closeness of their relationship.

When things unfortunately fall apart, this conjoined investment quickly turns sour, and the once-happy couple quickly looks to selling. Sometimes, one party or the other receives the note as a settlement and is looking to offload the cost, possibly to pay for legal fees. Other times, one party seeks to sell their portion of the investment to wipe themselves clean of the entire situation. Either way, while a divorce is an unfortunate piece of our societal puzzle, it is a very common reason for selling a mortgage note.

Medical Expenses

If you become ill or incur bodily injury, it can be tough to continue to pay sometimes pricey medical bills without the ability to work. One solution is to sell your note, or a part of your note, to American Equity Funding.

Doing so would allow you to obtain an initial lump sum upfront to continue to pay bills. It’s tough making ends meet when unable to work. Unless, of course, you use your mortgage note to your advantage, giving you the leeway to pay back costly medical expenses before they pile up.

Taxes/Collections

Most people agree that chasing a payee around to receive payment on any type of debt can be exhausting. Not wanting to put yourself through the stresses of ensuring weekly, monthly, quarterly, or even annual payments is understandable.

Let American Equity Funding worry about payment for a while, by selling a portion of your note to us.

New Business

Selling a mortgage note can allow for investment into that career foray you’ve been hoping for. The lump capital acquired from a note sale can then be used as a purchase or down payment into an additional, or alternative, career.

New House

Similar to the previous paragraph, selling a mortgage note to American Equity Funding can open the door to a new home (pun intended). The capital acquired from a note sale can, many times is, used as an initial down payment on a home.

But why not simply live in the location covered by the mortgage note in the first place? Remember, mortgage notes can also include non-residential buildings.

mortgage note buyers

3 Things American Equity Funding Does That Other Mortgage Note Buyers Don’t (Or Won’t)

When you bring in a recently created mortgage note or deed of trust to American Equity funding, you most likely are already aware that it is a complex numerical system of recurring transactions and compound interest. Already sound scary?

As the ever-educated mortgage note seller, you’re also most likely aware there are multiple mortgage note buyers in which to choose. So how to choose? Selling all or part of your mortgage note is an extremely personal event, so choosing the mortgage note broker that seamlessly manages your note – or notes – while also making you feel as at ease as possible in what can be a stressful time.

Selling Multiple Notes

Selling a recently obtained mortgage note can be very stressful, at the very best. Attempting to sell multiple mortgage notes at the same time can be a downright nightmare. And as always, the devil is in the details.

“You and your staff were very helpful when I had questions and needed assistance when ironing out some details to sell the notes. Though there were numerous notes involved, each file received individual attention to detail; I received personalized attention as well, which is especially nice…”  Steve Jeffcoat. Oct, 2003.

Last and certainly not least, the most telling and humbling part of any successful business is customer retention. American Equity Funding proudly has many returning customers, many of which have used American Equity Funding’s services for over a decade.

“I sold [American Equity Funding] paper on 2 houses and I am in the process of selling 4 more.” – James Shirley. Aug, 2005.

Taking It One Step Further

It’s important for a mortgage brokerage company to provide peace of mind to selling all or part of your note, and American Equity Funding will absolutely put you at ease with every transaction. But only American Equity Funding takes it one step further with unique, individualized attention to detail on every note sale.

Steve and Aimee take care of each note sale, personally, making each transaction equally as important as the next. It matters not if selling a large mortgage note for a commercial warehouse space, or a note for a single-family home on a spot of land all your own, Steve and Aimee at American Equity Funding treat you, the customer, as exactly what you are – a friend! No matter the type of mortgage note you wish to sell.

“This is simply to say how much I appreciated the expert, friendly, and timely service your company provided while purchasing several of my real estate notes.” – Larry Pennington, Pennington Properties Greenville, TX

Both residential and commercial mortgage note customers have been more than satisfied by American Equity Funding.

purchasing a mortgage

Why You Need Accurate Information Before Purchasing a Mortgage

We frequently receive phone calls from people asking how much we’d purchase their $100,000.00 mortgage note for. Unfortunately, giving someone a quote on purchasing a mortgage is not that simple. The financial rules and regulations surrounding purchasing a mortgage are incredibly complex, and we are not able to accurately address inquiries like these without receiving specific information from the inquiring party.

When someone decides to sell their car, they know they are signing up for a process that is much more detailed and information-heavy than simply saying, “I have a Ford for sale. How much will you pay for it?” It’s imperative that potential buyers know details like if the vehicle is a truck or car, the year, model, mileage, condition, etc. Specific details give the buyer an idea of what exactly they are potentially purchasing.

A mortgage is very similar, especially an owner-financed note, and there are many factors that determine the value of a note.

What We’ll Ask About:

  • How much your down payment was on the property at purchase – This helps us gauge how much a mortgage is worth now and how much equity a person has in the property. Equity is a big factor in determining the value of a note.
  • How long have you been making payments on your mortgage (this sometimes is called seasoning) – The longer the payment history, the better the price —especially if your pay record is verifiably consistent—.
  • What the interest rate you’re paying is – For example, if the rate is lower, the note price is typically going to be lower as well. We frequently see notes that are written at 0% interest. Obviously, we are not going to get near as much revenue for notes with no interest as we would for a note with 7% interest. You might be surprised that someone would choose to sell a mortgage with zero interest, but we see quite a few of these situations for many different reasons.
  • What is the loan-to-value ratio – For example, what is the property securing the mortgage worth in relationship to the balance of the mortgage? If your property is worth $100,000.00
    and the mortgage note balance is $80,000.00, the loan-to-value ratio is 80%. If the value is
    $100,000.00 and the balance is $95,000.00, then the ratio becomes 95%. More than likely, the note with the 80% loan-to-value ratio is going to bring more money than the 95% loan-to-value ratio due to risk/reward.
  • Good verifiable pay record – If we can verify your pay record by using bank statements, deposit slips or canceled checks, this really helps the process on our end, especially if the payer’s credit is a little weak.
  • If the credit score is higher, typically that will add value to your note – Having a good credit score helps prove reliability and will normally increase the value of your note.
  • The term of the note – Typically, the shorter the term the better. Balloons are accepted, but not preferred.
  • What Type of Property Is It – Usually, a single-family-owner-occupied-home is the best and receives the best price, although we do purchase all types: Land, commercial, industrial, manufactured homes and land, and business notes.
  • Geography – Location and geography can be important. If the property is in an area of appreciation, the note may have more value than if it is in a declining area where values are going down. Certain industries can also influence the note market, such as oil and gas.
  • Employment – Employment of the payer can influence the price of a note and whether we can even purchase it. If the payers are out of work, it may be difficult or even impossible to buy the note.
  • Documentation – Having the proper documentation can affect the price of a mortgage note either positively or negatively. We live in an environment filled with many complicated regulations and laws, so we always suggest having a professional prepare and file your documents, such as an attorney who practices in your state.

Finally, we recommend dealing with someone you like and trust. Working with someone you trust and like shouldn’t be a problem when it comes to giving them any information that would help you get the best price possible for your owner financed mortgage note. We encourage everyone to thoroughly vet us, American Equity Funding, through the Better Business Bureau and other trusted sources. We have many satisfied customers we can refer you to as well. We hope this helps you understand why it is best to give all the information to the note buyer before receiving a quote. If we have limited info, we will have to act conservatively to cover the risk of the unknown.

Understanding Mortgages, Deed of Trusts, Promissory Notes & Land Contracts

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Photo from journal.firsttuesday.us

In our line of work we are often asked for clarification on the different types of lending agreements available and which ones are best and why. In today’s post we will define and compare, side-by-side, mortgages, deeds of trust, promissory notes and land contracts in order to give you the basics of understanding mortgages, deeds of trust, promissory notes, and land contracts.

A mortgage is a security interest in property held by a lender as a security for a debt, usually a loan of money but not always. In place of money, a mortgage is given to the seller of a particular property to secure the debt. Contrary to many people’s understanding, a mortgage is NOT a debt, but the lender’s security for a debt. Essentially, the mortgage is a security for the loan. Mortgages are mostly used to secure real property but in some jurisdictions can be used to secure personal property. The word mortgage came from French Law and is defined as a “dead pledge.” When the pledge ends or “dies,” it is finished by either the loan being satisfied or the property being foreclosed. If the borrower defaults on the loan, the lender can foreclose, meaning they can sell the mortgaged property and keep as much of the proceeds as needed to pay off the debt.

A mortgage is usually recorded with a County Clerk to notify the public that there is money owed on the property and must be paid off if the borrower sells or otherwise conveys the property. This is discovered when a title search is done preparatory to Title Insurance being issued.

A deed of trust differs from a mortgage in that there are three parties involved: the Lender (Beneficiary), the Borrower (Trustor) and the Trustee. Deed of trust transactions are structured as follows:

  1. The lender gives the borrower money to buy a property.
  2. The borrower tenders the money to the seller.
  3. The seller executes a grant deed giving the property to the borrower.
  4. The borrower immediately executes a deed of trust giving the property to the trustee to be held in trust for the lender until the debt is satisfied, or in the case of default, foreclosed upon.
  5. Upon full satisfaction of the debt, the lender instructs the trustee to transfer the property back to the borrower by reconveyance.

States that typically use deeds of trust are Alaska, Arizona, California, Colorado, the District of Columbia, Idaho, Maryland, Mississippi, Missouri, Montana, Nebraska, Nevada, North Carolina, Oregon, Tennessee, Texas, Utah, Virginia, Washington, and West Virginia.

In a deed of trust, the third party holds the legal title, while in the context of mortgages, the borrower gives legal title directly to the lender.

The advantage of a deed of trust over a mortgage is that in most states that use deeds of trust the lender conveys the right to the trustee, without suing in court, to give written legal notice and to have the property auctioned to the highest bidder in case the borrower defaults on the loan. This greatly reduces the time and expense of foreclosures.

A promissory note is a legal instrument in which the issuer promises in writing to pay a sum of money to the payee either at a fixed or determinable future time, or on demand of the payee, under specific terms. A promissory note is usually the instrument used as the promise to pay connected to a deed of trust or mortgage.

A land contract is known by many other names, like contract for deed, agreement for deed, land installment contract, bond for title, or an installment sale agreement. It is a contract between a seller and buyer of property in which the seller provides financing to the buyer to purchase the property for an agreed-upon price and the buyer repays the loan in installments. Under a land contract, the seller retains the legal title to the property, while permitting the buyer to take possession of it. The sale price is typically paid in periodic installments amortized over a predetermined time period. When the full purchase price and any interest are paid, the seller is obligated to convey legal title of the property to the buyer. An initial down payment from the buyer to the seller is usually also required. The legal status of land contracts varies from region to region.

Reasons for using a land contract might be to help in selling land which is low priced and not easily financed with a bank. It’s also beneficial when a buyer has credit issues as a land contract provides some convenience to the seller in the case of default. A land contract can also save on closing costs so is helpful if both parties have limited cash.

Before deciding which type of agreement you use to secure your financing, it is highly recommend that you contact an attorney in your local state and county as the laws can vary from state to state. Also check to make sure you are in compliance with any state and federal licensing laws.

Sources:
https://en.wikipedia.org

Mortgage Note Basics

Mortgage Note Basics

I keep hearing mention of ‘mortgages notes’ and ‘promissory notes’, but being a financial novice, I really have no idea what this is all about! What the heck is it?

Are you unsure about the fundamentals about financial notes? American Equity Funding is here to take you by the hand and gently teach you promissory note and mortgage note basics!

The Mortgage

First off, a mortgage is the name of a loan you get to buy your house or property. When you take out a mortgage loan, you typically make a promise of actual property as collateral for the payment of a debt to a creditor. If you take out a mortgage to buy your property, that means someone loaned you money to buy the house, and the house is a guarantee for the loan.  Again, this debt is generally acquired by the borrower for the purchase of the property that has been used as the security. The borrower maintains custody of the property, as long as payments are made in full to the creditor. The lender’s security interest in the estate is the mortgage. A mortgage is usually signed concurrently with a note.

The Note

A note, or promissory note, is a signed contract where a participant agrees to an oath to pay an amount of money under certain conditions to an individual or group. It quintessentially is a much more official and legally binding IOU or a pledge to pay back a loan.  A promissory note is the main document that standardizes the loan pay back procedure conditions when purchasing a home or other assets.  When a promissory note is signed for a mortgage, it is known as a mortgage note.  The mortgage and the promissory note are integrally joined. A mortgages promissory note goes by many names, some people and companies choosing to call it a real estate lien note, a borrower’s note or a mortgage note. You should comprehensively recognize the mortgages promissory note, or mortgage note, as it is a tremendously significant certificate.

Terms of the Note

A mortgage note details terms such as names of borrowers and lender, property addresses and a legal detailed account of the physical property known as the exhibit. Certain specific terms are used in a mortgage note. The obligor or promisor is the individual who is swearing to pay back the borrowed money. The obligee or promisee is the party, usually a bank, credit union or lender, authorized to collect payment for the loan.  The legal term used for describing the value accepted in exchange for joining into a contract is the consideration.  When signing the note and accepting consideration, a borrower generally agrees to such concessions as keeping up maintenance and insurance for the land or home, using the property as his or her primary residence and not using it as a dump for garbage or chemical waste. In a normal real estate situation a borrower settles, in the promise to pay section of the promissory note, on rendering to a lender monthly prearranged repayments of interest and principal over a 20 year period. This period can be more or less years, from a 15 years to 30, depending on the term agreement detailed in your mortgage note.

Agreed-upon installments are usually due on a specific unchanging day unless modifications or amendments are made, approved, signed and witnessed by both parties.  Archetypal notes incorporate a stipulation explaining whether the loan is a fixed, adjustable or graduated payment mortgage.  They may also include writing that establishes deadlines for the lender to receive payment, possible late fee penalties and “no pre-payment fee” clauses.

If You Refuse to Repay the Loan

If you refuse to repay the loan, the lender has the opportunity to take possession of the house.  Also, if you do not pay, this opens the borrower up for legal ramifications such as lawsuits drafted by the lender seeking compensation for breach of contract.  The lender also has the ability to foreclose or sell the property in case of that breach of contract. The lender can also file in county or city records your mortgage documents, which in turn function as a legal lien. Legal liens can be scary, but they are not so uncommon. However, it is best to avoid getting to that point.

Reading the Terms Leads to Happiness!

It is very important that you carefully consider your choice of mortgage, the terms reached in your mortgage note, and always try your best to make timely and full payments on your mortgage during its duration. Doing so will allow you to be confident in your choices and lead to a much happier experience. Sometimes you have the right to prepay your mortgage loan without a penalty, and the best way to be sure of this is to check your mortgage note.  All terms and details should be fully expanded upon and explained within that agreement. The best advice one can follow is to read the terms and conditions that may apply… before signing. Who knows, there may be a wonderful grace period before going into default that may save your hiney! In addition, it is very advantageous to know if the loan is assumable. Can someone, say American Equity Funding, buy your property and take over your loan?

Top 13 Reasons For a Discounted Mortgage Note

Mortage Note DiscountedSomething odd just happened to you. You went to sell your mortgage note and discovered the buyer was only interested in purchasing it at a discount. Why would they want to acquire your valuable note at a reduced cost? The note is worth a lot over the years, am I right?! Well, yes and no. The value you see in your note might differ from but the value another sees in it. The following is a list of the top 13 reasons why your mortgage note may have been discounted when you finally got around to selling it.

Your May Have a Discounted Mortgage Note Due to:

1. The Time Value of Money

This means a dollar today is worth more than a dollar in the future. For example, if I told you I would give you $5.00 today or $10.00 in 20 years, most people will take the $5.00 today. Also, take into account the rules of inflation. Your buyer may offer you less for your note, but because they are presenting you money in the present, it is technically worth about the same as that future price.

 2. Owner Financing

Most of the time people decide to owner finance because the note will not fit traditional financing. Owner financing has been proven to create more risk than traditional financing, thus requires more of a discount. Increased risk always makes a buyer weary, and when buyers are weary, they are less likely to spend as much.

3. Unusual Terms

Deviant or nonstandard stipulations in your note, such as interest only and a balloon, are factors that may contribute to a discount. Buyers are simply uncomfortable when they need to step out of their comfort zone, so they may request that reduction.

4. Unusual Collateral

Similar to unusual terms, buyers are ill at ease with unusual collateral. When your collateral breaks the cookie cutter mold of property, it tends to create a bit of risk and could prompt a discount.

5. Appraisal Issues

Anytime there are issues, buyer confidence can become shaky. Same goes for during an appraisal! So make sure your house is in order and take this part of the buying process very seriously.

6. Documentation Being Light

In today’s market of Dodd Frank and other new regulations, there are many factors that make a note hard to write for a bank or other traditional lender. Due to new and emphasized rules and regulations, everything must have full legal documentation. If documentation is light, a note can still be written, but at a cost. When you go to sell your lightly documented note, a buyer faces risk. Risk for a buyer, as we well know, ultimately leads to a discount.

7. The Nature of Selling to a Company

When selling your note to a company, take into account the fact that this company must make a profit in order to survive. They are taking a leap of faith with every purchase. Companies doing owner financing are looking for higher yields due to risk and other factors that come from the nature of owner financing.

8. Credit Rating

No matter where you turn, credit ratings will affect every part of your life, and there is little exception to this rule. The discount of a note follows right along, so consider this factor when you go to sell.

9. Length of Term

The term can affect the discount of a note. The shorter the term, typically the smaller the discount.

10. Local Market Health 

The local market for real estate can affect the discount. For example, if the market is good, then there may be less discount.

11. Seasoning

Seasoning can affect the discount. Seasoning refers to the life of the note; how little or long a note has been around, and the length of time it has been paid. For example, if the payers have been paying for a longer period of time, then perhaps the discount may be less.

12. Pay Record

Pay record can affect the discount. For instance, if the payer has had a history for the last 12 to 24 months of paying on time, this may help boost the price you get for selling the note.

13. National and Global Market Health

The risk of another real estate crash like we had in 2008  would devalue a note considerably.

As you can see, the factors contributing to the final purchase price of a note are extensive. Each of these risks may possibly lead to a discounted note, but, hey, that is the high cost of living! Don’t worry too much about these risks, but be sensible and realistic by making yourself familiar with them. Here at American Equity Funding we always try to offer a fair and honest price on all notes purchased. Also, we are here to answer any and all questions you may have in the process of selling your note, so feel free to contact us at any time.

10 Reasons to Use American Equity Funding, Inc.

So you are thinking about selling the Deed of Trust, Land Contract, Bond for Title, Mortgage Note or Promissory Note you hold and are unsure who to turn to for help? You need someone you can trust who has your best interests at heart and the experience to maximize the return on your investment. In today’s post, American Equity Funding aims to demonstrate why our company is the best partner to aid you in selling your mortgage note. Like David Letterman used to do, we have chosen a Top Ten List to highlight the most important reasons why we should be your preferred partner.

  1. We’ve spent 24 years in the business and have bought and sold over 10,000 real estate notes since 1992. On our staff, we have three people with over 20 years of experience. It’s unlikely that there is a note or situation that we haven’t experienced.
  2. When you call us during business hours, your call will be answered by a person and never an automated phone system. Our hours are 8:30 a.m. to 5:00 P.M. CST. We like to keep thing personal and friendly. Our clients are valued as individuals, not as a means to profits. We are small enough to be personal but big enough to get the job done.
  3. We can provide you with many referrals of satisfied clients.
  4. American Equity Funding has an A+ rating with the Better Business Bureau.
  5. We rely on information and substance rather than slimy sales tactics. We can have straightforward, clear conversations that do not waste anyone’s time or money. You won’t feel like you have been “through the mud” or that you have been manipulated by a smooth talking salesman.
  6. We make the note-selling process as smooth and simple as possible. You will not be burdened with a complicated, drawn out, note-selling debacle that causes more strain and stress than necessary.
  7. We handle the transfer of the note from you to us very gently and aim to keep the note payer as satisfied as possible. We typically will not contact them until near the end of the process and then only after you have disclosed to them that you are selling the note.
  8. We pride ourselves in having success in processing notes that provide challenges. If you have a mortgage note that has been turned down by someone else, please give us a try.
  9. We pay all of the cost. Any figure we give to you will be a net figure. This takes the guess work out of the money you’ll receive at closing. You won’t be disappointed at closing to learn you’re getting less than originally thought.
  10. We love what we do and enjoy helping clients solve problems. We have made many friends over the years from our business.

For even more information on American Equity Funding, please visit our Mortgage Note information pages. If you’re still not convinced, why not give us a call at 479-632-0851, or email us at aefinc@americanequityfunding.com. You can also request a free quote here.

How To: Selling Mortgage Notes

Selling a Mortgage Note

A mortgage note shows proof of lien or debt for your piece of property. This includes both homes and raw pieces of land without any buildings.

While it’s nice to have note on a property, sometimes you simply can’t afford the responsibility. Things like late payments, tax issues, insurance liabilities and foreclosure could all contribute to your selling decision.

And other times you don’t have any foreseeable problems. You just want the cash.

Regardless of your reasons, selling a note may feel like the best choice. But how do you start this process? What’s involved in the selling procedure? Ultimately, how do you decide on whether or not selling mortgage notes is right for you?

In this article, we’re going to answer these questions and prepare you for the selling process.

1. Make the Decision to Sell

Before you enter into any proceedings, make sure you want to take this path. If you just feel strapped for cash, consider evaluating other funding options.

You don’t want to get in too deep, only to realize that you’ve wasted everyone’s time and energy (including your own). Feel confident and comfortable with your decision before going any further.

2. Evaluate Your Options

Once you make the decision, start evaluating your options. You need to understand the best sale option for your note.

Choosing the right option sets the tone for the rest of your arrangement. So, be thorough and careful as you consider what to do.

3. Select a Note Buyer

You can find hundreds of note buyers that will gladly invest in your property. But ultimately, you should only do this with someone that makes you comfortable.

At this end of the day, this is a business transaction. Look for a professional, respectful and responsive company.

4. Enter Into a Sale Agreement

Once you’ve selected the investor, it’s time to build a sales agreement. It will contain the following information:

  • Sale price
  • Number of payments sold
  • Party responsible for closing expenses

5. Schedule Closing

Provide all the documents required for investor review (i.e. due diligence), and prepare to wait several weeks for everything to process.

Assuming your due diligence looks good, the investor will contact you to schedule closing.

At that point, it’s just a matter of signing a few documents and receiving your cash.

Ready to Start the Process?

Now that you know how to sell a mortgage note, it’s time to start the process. You’re just a few short steps away from having the cash you need.

Don’t waste another moment. Find a qualified note buyer that will join you on this journey.

Credit Scores 101

Credit Scores 101

Welcome to Credit Scores 101! We hear about credit scores all the time from TV and radio ads to spam emails urging us to check our scores. But whether you know your credit score or have never even thought to investigate it, everyone should be taking the time to manage and to boost their credit scores. In today’s post, we will explain how credit scores are determined and how you can find your own score.

credit scores 101

Photo from www.azrenews.com

What is a credit score?

A credit score is a tool used by lenders to help determine whether you qualify for a particular credit card, loan, mortgage or service. When you apply for credit, your credit score indicates to lenders if you are going to be a risk to them, or if they can reasonably trust that you will repay what you owe. A credit score helps lenders make an assessment of your financial responsibility so they can decide to either approve or deny an agreement with you and how to set the terms of the agreement.  People with high scores are usually seen as a lower risk and are more likely to be granted credit and potentially at better rates.

How are credit scores calculated?

It should be noted that every lender calculates scores differently – there is no universal rating system. So while one lender may deny you, it doesn’t mean another lender won’t approve you. Lenders look at your credit history, your application information and any past dealings they may have had with you. Lenders rely on credit reporting agencies like Equifax, Experian, and TransUnion to determine your credit history. These credit reporting agencies look at a number of factors to determine their own reports which are then passed on to lenders when requested.

Because credit scoring is a way to predict your future behavior, your past behavior is reviewed. While a poor credit history can lower your score, little to no credit history can also count against you. A major factor in determining your score is your payment history – how often you have paid your bills on time. They also look at the amount you owe and amount of credit you have available. Borrowers who are close to maxing out their credit are seen as more likely to miss payments. The length of history is determined by the average age of your accounts and how long it has been since those accounts were used. Less important but also taken into account is how often you’ve opened new accounts. Opening several accounts at once can weaken your score. Lenders also like to see that you can manage different kinds of accounts so having a variety of credit types, like a mortgage, student loan, and credit card, can improve your score.

How can I find my credit score?

It’s recommended that you check your credit reports annually from each of the three agencies – Experian, Equifax and TransUnion. Doing so will make sure your credit is up-to-date and accurate. As each reporting agency collects and records information in different ways, they may not have the same information about your credit history. Under federal law, you are entitled to a free copy of your credit report annually from all three credit reporting agencies once every 12 months.

You can request your free statutory annual credit file disclosure by one of three ways:

  1. On the Internet: www.annualcreditreport.com
  2. On the phone: call 1-877-322-8228
  3. By mail – complete the Annual Credit Report Request Form and mail to:

 Annual Credit Report Request Service
 P.O. Box 105281
 Atlanta, GA 30348-5281

Your free annual credit report does not include your credit score. A credit score is an additional service that can be purchased when getting your credit report. Along with knowing your credit score, you will learn what factors positively or negatively impact your credit risk.

At American Equity Funding, we understand how important it is to maintain a good credit score if you wish to get ahead in life financially. If you have any questions about credit scores and what you can do to improve yours, give us a call at 479-632-0851, or email us at aefinc@americanequityfunding.com.

Are Promissory Notes Legally Binding?

In a word: Yes.promissory notes legally binding

The promissory note, or a written document describing the terms and conditions of loan repayment by the maker of the promissory note (‘maker’) and the payee of the loan in question (‘payee’), is used in a variety of financial situations. But are all promissory notes legally binding? Again, in a word: Yes…assuming you avoid common pitfalls and mistakes and by using online promissory note creator tools and the information below.

No matter if it’s a small family loan between friends, or a mortgage on a house, promissory notes’ legally binding status is literally in your hands.

Secured v. Unsecured Promissory Note

Secured promissory notes provide the payee protection from the promissory loan amount being defaulted upon. The most common example is promissory notes produced by car dealers on vehicle leases and loans. In these cases, the payee (the car dealer or dealership) will have written allowance to repossess the vehicle in question if the loan amounts have not been paid at the time due. A similar act can occur if mortgage payments are defaulted, as well. Rather than take a car in question, the bank – and more specifically federal loan agencies managing the loaning practices of that bank – are within their legal right to repossess any home that has defaulted on their mortgage payments (aka the money lent in the promissory note).

Unsecured promissory notes have no guarantee to the loan payee. If the loan repayments are delinquent or missing, the payee has no legal right to repossession of any additional collateral beyond the money originally leant to the maker to make up for unpaid loan amounts. While no less legally binding, unsecured promissory notes are typically utilized in more personal, or low-risk situations, such as money lent between friends or colleagues, but are also often found in small business loans from banks. Furthermore, a lending institution may tack on high interest rates upon repayment for the security of their loan amount, rather than issue a secured promissory note. This is still considered an unsecured promissory note because there is no penalty after default, but instead a higher interest repayment plan to begin with.

Find the Right Promissory Note for Any Loan

There is a litany of online promissory note creator tools out there that are free for public use. Rather than starting from scratch, use the links below to have knowledgeable companies in the industry ensure your promissory note is, in fact, legally binding. See the ‘Exceptions’ section below for common pitfalls and mistakes that would reverse your written promissory notes legally binding status in a court of law.

Free Unsecured Promissory Note Creator

Free Secured Promissory Note Creator

 

Exceptions

There is not one universally ‘right’ way to create a promissory note, legally binding promissory notes can come in a variety of looks, lengths, and specificities. Each promissory note should be specific to the situation (the free tools above account for this). Because of such a wide range in proper promissory note procedures, some payees overlook critical errors in the promissory document that could lead to potential losses in court.

Missing Signatures

If either party has not signed the promissory note in all necessary sections, those parties have never officially agreed to the promissory note in the eyes of the courts and the promissory notes legally binding status will be voided.

Original Note Missing

The most recent exception has come about due to the ease at which a signature can be copy-pasted to a document in modern society. All promissory note payees must be able to produce the original promissory note agreed upon. Copies of promissory notes without the production of the original are considered illegitimate. Always be sure to keep the original copy on file, otherwise the promissory notes legally binding status will be revoked and void.

Illegally High Interest Rate

Each state has its own regulations regarding exactly what rate is considered illegal. Be sure to check with individual state laws before proposing any promissory note. Furthermore, the complexity of individual state and federal laws regarding illegal interest rates does not stop there.

According to Steve Whitlock of American Equity Funding, “Interest rates for residential loans are different than on liens and unsecured notes. They are lower and regulated depending on the lender by state or federal laws.”

Statutes of Limitation

Like any legally binding contract, there must be a specified time for repayment to the payee. If the promissory note does not contain a statute of limitations, or the statute of limitations agreed upon in the promissory note has passed, that promissory notes legally binding status will be voided.

Notarizations

Promissory notes need not be notarized, but it is highly recommended in case of possible future injunctions from a lawsuit.

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