Selling An Owner Financed Mortgage Note
The wise adage of ‘anything worth doing is worth doing well’ rings true when preparing to sell an owner-financed mortgage note.
Oftentimes, the sale of a mortgage note becomes complicated when the necessary knowledge or paperwork is not readily available.
Preparation to sell begins when an owner originally finances the sale of a property and
safeguards the proper and essential information. This is important when selling an owner-carried mortgage to ensure an accurate quote and fair value.
Acquiring a Quote
Provide as many of the following details as possible about the owner-financed mortgage note will make it easier to receive a timely and appropriate quote:
- Borrower information: Credit history, employment, income, etc.
- Sale of Property: Date, price, down payment, and amount financed.
- Type: States have varied titles for a mortgage note. Is it a mortgage and note or a land
- Property: What type of property constitutes collateral?
- These comprise single-family homes, duplexes, mobile homes with land, land only, and residential or commercial buildings. The type of real estate that secures the mortgage rate is as crucial as the borrower’s credit worthiness.
- Credit score: Most companies rely on credit scores from Experian, Trans Union, or Equifax.
- Although not required, providing the borrower’s social security number will
also aid in securing a precise quote.
American Equity Funding will review the cause of low credit ratings.
- Loan to Value, (LTV): Making sure the real estate is not overpriced is good business. The larger the downpayment, the more equity the borrower has in the property and, therefore, a better LTV ratio for the mortgage note holder.
- Increased equity and higher credit can increase the likelihood of borrowers continuing to make payments on significant investments. Most people will do their utmost to keep the money put into a property.
As a result, the value of the mortgage note rises and places the seller in a position to
receive the best quote possible.
- Repayment terms: Make sure that all conditions are clear and understood and that the default terms of the mortgage note are unambiguous.
This entails the amount financed, interest
rate, late fees, the maturity date of the mortgage note, and the number, amount, and date of payments.
A high-interest rate is preferred, but always check with local, state, or federal guidelines
for legal collection rates. This, combined with a shorter payment length, will improve the quote.
- Escrow impound requirements: It is recommended to include escrow impound requirements which can be for either or both property taxes and insurance. The monthly servicer should adjust the monthly impound payments per the yearly changes to taxes and insurance premiums.
Safe and Secure
Mortgage notes are negotiable, and safely keeping them and all related documents together is important.
A lost note can sometimes be corrected by the seller producing a lost note affidavit, but there is no guarantee that the note buyer will accept the document. This also takes additional time to create and execute.
There are many ways to repay a mortgage note. Although most are easy to understand, some can be difficult. American Equity Funding has extensive knowledge and experience in all types of notes and offers sound advice. All inquiries are welcome.