Creating profitable mortgage notes from the outset

Here are the basic steps to make sure your note will sell quickly so you can exit quickly and redeploy those funds:

  • Down Payment Size Matters: Note buyers like to see a down payment of 15% or higher
  • Credit score matters: Make sure to vet your borrower and run a full credit check. A score of 625 or higher is ideal
  • Length matters: Most buyers like to see a maximum term length of 15 years
  • Lender’s title policy: This is an insurance policy protecting lien interest which protects the value of the note
  • Interest rate matters: It should be at least 2% to 5% percent points higher than the going market rate
  • Avoid Interest-only structures: These offer less profit for buyers and require steeper discounts
  • A personal guarantee matters: Very important, especially if the borrower is a corporate entity

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