Most people, including a large portion of realtors, bank officers, and real-property investors, do not understand how to invest in notes. Those in the financial world may have heard about owner financing and real-property notes but had no idea what they were talking about. In simple words, the job of a real-property notes buyer is to acquire real-property notes, which can also known as mortgages or deeds of trusts. One niche of real-property notes investing is the acquisition of business notes but that won’t be discussed here.
The first step towards buying a house involves contacting the seller and asking them if they’re interested in selling their house for cash. It typically takes between 10 and 20 minutes to complete this initial contact.
The next step in a loan application process is for the borrower and lender to agree on a payment plan. The borrower may often be willing to accept a lower interest rate if he can get an extension on his repayment schedule. In addition, the borrower may also be able to reduce the total number of payments he must make, thereby reducing his overall cost.
Once an agreement is reached, the seller will provide the prospective purchaser with proof of funds (POF) in order to secure the loan. The POF must be accompanied by a letter stating the amount being borrowed, the interest rate, and how much down payment was made. After reviewing the documentation provided, the lender will then conduct a drive-by appraisal and perform a title search to ensure no additional encumbrances exist on the home. Depending on the type of mortgage product purchased, the lender may also require the borrower to complete a financial questionnaire. This process can take anywhere from one week to two months depending on the complexity of the transaction.
The final step of the loan closing process is that the borrower signs the title insurance policy and delivers it to the lender along with the payoff statement. The lender then notifies the title company to release the lien on the property. Once the title company receives payment, they record the transaction with the local government office. Finally, the lender wires the proceeds back to the borrower. The entire loan closing process takes about 30 minutes.