Selling A Kentucky Real Property Note To The Top Note Seller

In most cases, an owner financed mortgage is used to purchase a home. A homeowner can finance his/her own home through either a conventional loan or a FHA loan. A conventional loan allows the borrower to pay back the money borrowed plus interest over a period of time. A FHA loan does not require the borrower to put down cash upfront; instead, the lender provides funds to the borrower so he/she can buy a home. These loans do come with certain restrictions, such as being limited to a maximum amount per year and having higher rates of interest compared to conventional mortgages. Both the conventional and FHA loans allow borrowers to refinance their homes after they’ve paid off the initial principal amount. However, if a borrower defaults on his/her loan, the bank may foreclose on the home. After foreclosure, the bank sells the home and takes out the remaining debt owed to them. The proceeds from the sale go towards paying off the outstanding debt.

The Sales Process

The process for a Kentucky real estate loan begins when the borrower and lender agree upon an amount of money to borrow. A lawyer or notary public would then prepare the legal document called a promissory letter (also referred to as a “loan commitment”) setting forth the terms of the loan agreement. When both parties sign the promissory letter, they enter into a legally binding contract. In addition to the promissory letter itself, the lender may also require additional documentation such as a copy of the borrower’s driver license and proof of employment.

If the customer fails to pay for an extended period of time, the seller may decide to take legal action against him or her. At this point, the bank may initiate foreclosure proceedings. At the end of these proceedings, the owner of the house gets their property back.

Selling A Note

Whether or not the loan is performing (current payment status) or non-performing, the borrower can sell the loan to a loan purchaser. Naturally, a performance loan would get a higher bid due to the lower risks involved. Top loan purchasers, such as ELM Capital, would notify borrowers about various options for buying loans. On a performance loan, the borrower could choose between purchasing the full amount or only some of the payments. After agreeing upon the price, the borrower would review the documentation, appraise the property, do a title and lien searches, etc. The whole process takes 3-5 days, after which the lender would deposit the agreed upon funds into an escrow account. Then, the borrower would start receiving payments directly from the debtor.