more questions on note structuring - Posted by Mike-Tx

Posted by Tom on April 07, 2000 at 22:07:31:

Long Beach Mortgage’s phone # is 888-981-8593 ext 236 tell Debbie that Tom From J&K Mortgages told you to call. She could put you in contact with a mortage broker in your area that deals with them. Tom

more questions on note structuring - Posted by Mike-Tx

Posted by Mike-Tx on April 07, 2000 at 20:04:46:

I am a rehabber and have started to do owner financing to turn my projects faster. I recently sold a
house to a buyer who could not get financed anywhere so I created a note and sold it immediately. I
had a note broker shop it prior to closing the sale of the house and we found a company willing to
buy the note on the following terms:

appraised value of house 39k
selling price of house 38k
cash down payment 5k
new note 33k at 12% 30 yrs
cash offer for note 27k (82%)

After receiving this offer we asked if any changes of terms would increase the cash payment, ie. 15
yr term vice 30yr, 15% int vice 12% int, adding a prepayment penalty, adding a ballon after 7 to 10
yrs. No changes offered would affect the price they were willing to pay for the note. They didn’t
seem to care if the term was short or long. This has confused me, I am trying to learn how these
notes should be structured for best resale and was under the impression that shorter term and higher
int rate was better. I must add that this buyer was pretty weak on the credit score (around 500) so I
am not complaining about the payoff (I had very little in the house and made my investment and
profit from the down payment). I’m just trying to see if there was ANY better way to put a note like
this together for immediate sale. Thanks for your patience and advice.

Re: more questions on note structuring - Posted by Mark-NC

Posted by Mark-NC on April 08, 2000 at 07:42:19:

Its generally tough to work with scores that low. As far as structuring with a higher rates or ballons it will not make a difference to Most note buyers. Most of them sell to mortgage companies later on that prefer full term loans and they have a cap on the rate on the note or mortgage for what they will pay for it. If it was a private Note Buyer with their own funds the terms you mentioned may make a difference.


Re: more questions on note structuring - Posted by Tom

Posted by Tom on April 07, 2000 at 20:44:32:

Mike, Something to think about. You could have went to a mortgage broker, for financing for your buyer. With a 500 score he should have been able to get you 80% LTV with 100% CLTV. By doing this he could have gotten a first mortgage for $31,200 plus his 5K down. You would have ended up with $31,200 plus $5,000 down payment or $36,200 in cash and a second mortgage for $2,800. The lender that would do this deal is Long Beach Mortgage. Good Luck on any future deals. Tom

Re: more questions on note structuring - Posted by mike-tx

Posted by mike-tx on April 07, 2000 at 21:54:26:

Tom, thanks for the input. In the early stages of this deal I did send him to a local mortgage company, I guess they were a little too conservative though, they offered an 80% loan BUT would not allow me to carry anything. They wanted the buyer to have the full 20% down. This buyer didn’t make things any easier either, he drives a truck and is out of town a LOT. I ended up doing a lot of the footwook on this and am just glad to put it behind me. For future reference, how can I contact Long Beach Mortgage? Thanks and good luck to you.