The majority of Private lenders are quite experienced professionals in the real estate industry with extensive knowledge of structuring loan agreements. However, most of them do not have long-term thoughts regarding loans, particularly in the form of an exit technique such as selling to investors when drafting their mortgage notes. Some of the necessary things to take note of as a private lender when preparing mortgage notes include:
- Down Payment: A critical factor in establishing a note’s worth is the leverage of the asset used. As a potential investor, one of the first things to look out for is the down payment that the borrower has in the loan transaction. Thus, lenders should ensure that large borrower down payments is made on transactions to sell mortgage notes on the secondary market quickly.
- Borrower Credit: While a credit score isn’t the most significant aspect in obtaining a private loan, a private lender needs to note that a note buyer will examine a Tri-Merge credit report to assess each borrower’s creditworthiness. It is most likely for notes with low borrowers’ credit scores, particularly below 600 middle FICO score, not to be purchased.
- Loan Seasoning: As a private lender looking to sell your mortgage note on the secondary market, it is good to know that a potential note buyer would need a few months for the seasoning on a note before any form of purchase deal would be agreed upon. Before selling a note on the open market, it should have two and six months of verifiable good performance.
Selling mortgage notes on the secondary market is profitable to secure private lenders’ funds and profits. Therefore, it is essential to gather sufficient knowledge about this process. To read more, click here.
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