I may be lending some large sums of cash shortly. Other than checking credit, getting references, what else should I do as far as checking out a person is who they say they are, or who can perform on contract as they say they can? Any websites, services are welcome.
Thanks
Dogmeat,
If you are talking about lending on real estate, more so than checking out the person, I think the most important part is checking out the property.
While the person may have great credit or references, they may encounter problems that cause them to not be able to pay. Your security is in the property. Make sure that you have a secure position and can protect your money.
Someone told me something one time that I still think of and use as my guide every time I make a loan on a house. He said, “Never lend on a house that you wouldn’t want to own or lend more than you would pay if you were buying it for yourself.” Smart man.
William is right about the property being the main concern. Lots of people have good credit that have never done a deal. See what they have done in the past too. Keep in mind that if you have to foreclose on the property that they will be several payments behind and will have destroyed the property. I have one you can look at if you are here in Austin that I sold for $70,000 and I took back from the buyer. I will spend $5000 in repairs just to get it liveable. I would loan no more than 65 to 70% of the value and see that the borrower has some real equity and some cash in the deal. Stay away from second liens unless the first is small and old. Hope my rambling helps a little.
Thank you,
Ted P. Stokely Jr
Just a comment about credit or the lack of.
I feel that all the credit reports and FICO scores and crap that lenders require for mortgages is bogus and only serves
one purpose… To analize the level of embarrassment of buyer as it relates to the interest rate they are likely to agree to pay… The loan should be based on the equity position of lender and income to debt ratio. Anything outside of that has no factual bases for predicting performance of loan. When I offer my property for sale I will ask buyer to give me a written self evaluation of their credit and proof of income over debt. My saftey net is the down payment and my equity. There is nothing else that
will cover my asset.
What are you lending on?? AND why are you lending large sums of money. What is being offer as collateral?? Is it on investment property, a business or ???. Get a financal statment and verify it. Evaluate its good and bad parts. How is your interest (return) being paid back (good cash flow from property??). AND, how are you getting your Princ. back!! Did you think of cross-collateral for extra security. Most people asking for money for investment will think twice before giving their HOME as additional collateral. No one wants to close their home. Maybe it’s my CPA background, or the fact that I’ve sold some of my investment (and took back seller 2nds) and had to hire collection agency to get my money.
There are a lot of things that can change between starting the deal and getting out of the deal.
Jeff