There's always a level of risk when you're a mortgage note buyer.
Like everything in life, there are a few bad apples in the pile that create a bad name for the others.
This is why both parties need to have certain standards to follow, as it's a way to protect themselves from financial disaster.
It means researching and looking at credit reports and backgrounds.
Has the note buyer or seller had a good rating throughout the years? It's important to remember that there's always some sort of risk when dealing with money, and it gets higher when there's more involved.
Sometimes it means there will be larger discount put in place.
However, big or small, there is certain criteria to use when evaluating the risk.
The first thing you should do is check the credit report of the person making the loan payments.
If the credit isn't good, then you might want to pass.
The other thing to consider as a mortgage note buyer is the property's value, which serves as collateral.
If it's low, then make sure the note's price is reasonable.
As the mortgage note buyer, learn the loan's terms before making any decisions.
Find out the interest rate on the loan, as well as the time period to pay the loan back.
It will make a difference on how much money has been put into the property.
It will also benefit you to know the down payment.
Another essential piece of information is the loan's status.
If it's current, then you would assume the borrower pays on time.
The problem may be late payments or if the note is in default.
The last thing you should know is the loan to value ratio, which is the money left on the loan balance against the property's value.