Here’s a lesson we had to learn the hard way. You’ll need to qualify your buyer before you accept any payment terms from them.
When we first started creating seller finance agreements with our buyers we were just excited that they wanted to buy the homes. We weren’t doing the best job of actually qualifying them and making sure that they will make their payments every single month.
The four criteria for qualifying buyers that you’re about to read are very important and they will save you guys a lot of time and hassle.
Criteria #1 Proof of income
We want to make sure our potential buyer has a stable income coming in every month. We usually check the past 2 or 3 month bank statements or pay stubs.
We like to see that the potential buyer is making at least 2 to 3 times their monthly payment every single month. That way they have more than enough money to pay the Lot Rent and the cash flow of monthly payments that they owe to you for the mobile home.
Criteria #2 Debt to income
We like to do a quick check to make sure that they don’t have too many debt payments compared to the income that they bring in every single month. So some of the debts we look at are student loans, car payments, and even
credit card debt.
You want to make sure that the majority of the money that they bring in every month is not going towards debt.
You want to make sure they can comfortably pay for the Lot Rent and the monthly payment to you each and every month.
Criteria #3 Background check
The majority of parks that you work with will have a qualification process that you’re going to have to put your potential buyers through. Most of the time they’re looking to see if your potential buyer has multiple bankruptcies, felonies, evictions, things of that nature.
It’s going to be good to check on all of this before sending the park manager every potential buyer. Let’s save them time and save ourselves time and only send them a qualified tenant.
And you don’t want to inherit a problem child either. If they have some things on their record that are questionable in your eyes, you want to make sure that you understand who you’re dealing with on a more detailed level.
So get the background check done. It’ll save you time and a headache in the future.
Criteria #4 Social security card or Tax ID number
Most parks need the tenant to show some sort of proof of status that says they are allowed to be here in the U.S in order to qualify to live in the community. So we usually ask for a social security card or some sort of visa or tax ID number so that we can verify that in advance.
Again, this is going to be crucial when getting your tenant’s approval through the park. So it helps save everyone a lot of time by getting those documents or some type of proof while you’re doing your pre-qualification process.
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