Over the last several decades of low mortgage loan costs, there wasn’t much new about owner-financed loans. However, banks and credit unions could usually provide lower-than-average mortgage loan costs for most borrowers, and there was a significant amount of refinance activity. Today, things are different; mortgage loan costs are rising again, and we’re likely to see some tightening of lending standards.
One way to finance a property purchase is through the creation of a deed of trusts. Reasons for creating a deed of trusts include:attracting more potential buyersSeller wants to defer tax on gainsaving the high closing costs and fees charged by banksmaking more flexible terms and payment plansDealt With Weak Buyer Credit Scoresmanaging sales between family members, or divorce agreements
A real estate owner financing loan includes an agreement between the borrower (the person who buys the house) and the lender (the person who sells the house). It usually has a fixed interest rate and a set length for repayment.
If the buyer doesn’t pay up front, you could end up losing out on some potential profits.
The holder of the Deeds of Title notes can sell them to any number of buyers, but they must pay off the loan first before receiving any proceeds from the sale. The value of the Deeds of title depends on several things, including the amount of cash down payment the borrower made when purchasing the house and the lender’s view of the borrower’s ability to repay the loan.
If you’re writing a Deeds of Trust (DOT) for a property, here are some tips for maximizing the amount you might get when you eventually sell the property. Also, these tips will help protect you if you never sell the property.You need to obtain a down payment. A down payment is usually between 10% and 30%, depending on the type of property. It may not always be possible to reach these amounts, so you’d better ask for as much as you can.If you can, try to get a seller who has good or excellent FICO scores. Ideally, they should have a FICO score of at least 675, but anything from 650 to 670 is usually fine. However, if their FICO score is under 620, then you may not be able to get any kind of loan for them.Make sure that the loan’s APR (annual percentage rate) is at least as high or higher than comparable bank rates.
We look at things like:property is owner-occupiedaccess to power, drinking water, and roads for transportation (for people).When considering commercial real estate, multi-unit apartment complexes and general purpose offices are easier to place than specialized businesses like fast food chains. It may be difficult to place a property that has been used for something else before; however, if there are no environmental concerns associated with the property, it might be worth pursuing.the property and its surroundings being in good condition
You’ll also want the sale price to be below the current real estate prices for similar properties and that the title to your house is clear.
If you have any questions about structuring your notes or possibly selling them, please reach out to us at any time.