If you're looking into buying mortgage secured Hard Money Notes, or any type of Note for that matter make sure you receive as much information as possible. When buying mortgage Notes you should require all of the information a conventional lender would expect, a recent property appraisal, full loan application (1003 is best), borrowers credit report, income documentation, title insurance commitment or policy, and all of the borrower's loan documentation, ie: Note, mortgage and disclosures. Make sure you receive assignments for both the Note and the Mortgage, the later must be recorded. The more information you have the more likely you'll be able to make an educated decision.
The Hard Money investor who purchases mortgage secured Notes should always receive a file containing the information I mentioned above from the hard money lender who is selling the Note. The most important element in these privately funded loans is the property appraisal showing recently sold comparable properties. Sale prices have dropped so quickly in some markets that any comps older than six months, even 3 months will be off the mark and the true value could be half of what you are lead to believe. As I've mentioned before I won't lend more than half of the appraised value and I don't accept anyone elses appraisals, it's my appraiser or nothing. If you fund with your self-directed IRA, the IRA custodian or administrator will give you a list of necessary documents they'll need such as the Note, Mortgage and Assignments to fund the mortgage investment through the IRA.
The financial crisis has closed off much of the real estate investor's ability to borrower through conventional means, unless there is a line-of-credit in place most will have to resort to unconventional lenders such as Hard Money or private money. The rates are typically much higher in Hard Money, and there are expensive closing and funding fees to be paid but experienced investors understand they'll have to pay a premium for this form of financing. In many cases Hard Money is cheaper than taking on a partner who wants to split the profit down the middle, or more.
Trent Dalrymple
Metro Mortgage Investments LLC
26789 Woodward Ave., Suite 107
Huntington Woods, MI 48070
(248) 547-3006
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