How We Make This Happen
If the borrower stops paying, you have some options. Some borrowers will sign a Deed in Lieu of foreclosure. This is basically them signing the house over to you. You can foreclose on the house. Texas is a non-judicial state and the foreclosure process is much faster than in many other states. Once you are the owner of the house you can sell the house, rent the house, or do anything you want with it. In the event that a borrower stops paying we are happy to assist you in any way we can to help resolve the situation.
Marketing and Acquisitions
We are searching everyday for properties that will fit our investment criteria. We spend a lot of time and energy marketing online, with other investors, and throughout or local community looking for the best investment deals.
Once we find a property that meets our criteria we will purchase that property either with our own funds or one of our private lenders.
Property Renovation
The majority of the homes we purchase need some type of renovation in order to get them ready to be sold. We try to purchase properties that we can have renovated and ready to sell in less than 30 days.
Our renovation teams will go to work reviving these houses and turning them into quality homes that fit the needs of our borrowers.
Sales
The sales team will go to work advertising all available properties throughout the community. They will show the houses to potential buyers letting them know what properties that we have for sale and the different financing options that we offer.
After a few showings and once we feel that we have a buyer that will be a good fit our sales team will begin collecting the application and documentation paperwork.
Borrower Screening
All borrowers are required to provide proof of income, employment, and ability to repay the loan. This includes bank statements, W-2s, pay stubs, tax returns, and ID. If all of their paperwork is in order, we will schedule their interview and contracting session. All borrowers must meet with one of the owners of the company prior to contracting to buy a house from us with owner financing. No exceptions.
All of the borrowers paperwork is then turned over to the RMLO for additional screening and processing. The RMLO will check credit, check for liens or judgments, and make sure that the initial paperwork is in order and show that the borrower has the ability to repay the mortgage.
Create Mortgage Note and Lien
Once the RMLO has approved the paperwork the contract has been sent over to a local title company, we can begin to send disclosures to the borrowers, clear title on the property, have to loan documents prepared, and schedule closing on the property.
The RMLO will send two sets of disclosures to the borrowers explaining all of the costs involved and what their loan payments will be. We require that our owner finance clients close at a title company and purchase a title policy insuring that the property is free and clear and that our new lien is in first position. A local attorney will produce the deed, deed of trust, and promissory note that will be signed at closing. After the title company has compiled all the paperwork, they will facilitate the closing in their office.
Note Servicing
We set up all of our mortgages with a third party note servicer. The note servicer will be the primary contact for the borrower throughout their loan. The note servicer will collect the payments from the borrower, hold in escrow the portion of the payment for taxes and insurance, and disburse the principal and interest to the note holder.
If you purchase a note you are not required to maintain servicing but it is paid for by the borrower and since all of our mortgages require that taxes and insurance are paid each month as part of the monthly payment, we have found that using a third party servicer makes these investments much more hands free and benefits the note holder.
Seems Like A Lot Of Work
Well, it is. But it is a lot of work for us, not the note buyer. We have also found that including all of these steps helps us to be completely transparent, set up the borrowers for success, and create a much stronger investment.
We did not develop these processes overnight. Instead we have spent years refining our process, looking back at hundreds of owner finance transactions, and we have created a process that we believe gives us, the borrower, and our investors the best chance for success.