How To Get Premium Pricing When Creating A Seller Financed Mortgage Note
How To Get Premium Pricing
When Creating
A Seller Financed Mortgage Note
Most seller financed mortgage notes are created without a roadmap.
The seller trusts the buyer. They agree on a price. They sign some papers. And somewhere along the way nobody explains that the decisions made at that closing table will permanently determine what that note is worth for the rest of its life.
If you are creating a seller financed mortgage note — or if you are thinking about it — this post is the roadmap nobody gave you.
Every decision below either adds value to your note or discounts it. Make the right decisions at closing and you create a note that commands premium pricing when you are ready to sell. Make the wrong ones and you spend years collecting payments on an asset worth significantly less than you think.
Start With A Residential Mortgage Loan Originator
The single most important decision you can make before closing is hiring a Residential Mortgage Loan Originator — commonly known as an RMLO.
Most private note holders have never heard of one. That gap is costing them.
An RMLO is a licensed mortgage professional who handles the origination of your seller financed note the same way a bank would handle a conventional mortgage. Here is what they do for you.
They pull your buyer's credit report. They analyze your buyer's debt to income ratio to confirm they can actually afford the payment. They ensure your note is originated in compliance with federal lending laws that most private sellers do not even know apply to them. They guide and educate your buyer about their loan obligations so there are no surprises down the road.
And here is what surprises most note holders. The RMLO's fees are paid by your buyer at closing — not you. You get professional grade origination and full compliance documentation at no cost to yourself.
A note originated with RMLO involvement commands significantly higher pricing than one created on a handshake. Note buyers know the difference immediately.
Buyer Credit Score — Aim For 650 And Above
Your buyer's credit score at closing is one of the most important factors in your note's value.
Note buyers price risk. A buyer with a strong credit score — 650 and above — represents lower risk. Lower risk means higher pricing for you.
A buyer with a credit score below 650 is a higher risk borrower. That risk gets priced into a steeper discount when you go to sell.
Your RMLO will pull your buyer's credit as part of the origination process. If the score is below 650 you have a decision to make before you close. A buyer who cannot qualify for a conventional mortgage at 650 or above is a buyer who will cost you money on the back end when you need to sell.
Get A Down Payment Of At Least 10 To 15 Percent
The down payment is your buyer's skin in the game. The more they put down the more they have to lose if they walk away.
A down payment of 10 to 15 percent at minimum creates an equity cushion that protects your note's value and signals to the market that your buyer is serious and financially committed.
A low or no down payment is a red flag for note buyers. It means your buyer has little to lose if things go sideways. That risk gets discounted steeply.
Do not negotiate away the down payment. It is one of the most powerful value drivers in your note.
Set Your Interest Rate At Least 1 To 6 Percent Above Current Bank Rates
Your interest rate is locked in at closing and stays fixed for the life of the note. Get it right the first time.
Seller financed notes should carry an interest rate at least 1 to 6 percent above current conventional bank rates. This reflects the additional risk your buyer represents — they could not get conventional financing — and it makes your note attractive to note buyers who are looking for yield above what they can get elsewhere.
A below market interest rate makes your note less attractive to buyers and directly reduces what they will pay for it. A note with a strong above market rate commands premium pricing.
15 To 20 Year Terms Are Best
Shorter terms mean less risk for note buyers — there is less time for things to go wrong. A 15 to 20 year term strikes the right balance between providing your buyer an affordable payment and keeping the risk window manageable for note buyers.
Longer terms — 25 to 30 years — increase the risk window and can reduce what a note buyer will pay. Shorter terms — under 15 years — can reduce the total income available to a buyer and also affect pricing.
15 to 20 years is the sweet spot for premium note pricing.
Amortized Is Better Than Interest Only
An amortized note means every payment reduces the principal balance. Your buyer is building equity with every payment. The balance owed goes down over time.
An interest only note means payments cover only the interest — the principal balance never decreases. Your buyer builds no equity. The risk profile is higher because there is no equity accumulation to cushion against a default.
Note buyers prefer amortized notes. Always structure your note as fully amortized.
Owner Occupied Residential Single Family Homes Are Preferred
The property securing your note matters as much as the note itself.
Owner occupied residential single family homes are the preferred collateral for note buyers. The reasoning is straightforward — a buyer living in the property has a strong personal incentive to keep making payments and maintain the property. They do not want to lose their home.
Rental properties and non-owner occupied properties carry more risk. A landlord who loses rental income may stop making payments. A tenant who damages a property reduces your collateral value. Note buyers price this risk with a discount.
If you have a choice between selling to an owner occupant and an investor — choose the owner occupant. Your note will be worth more.
Use A Third Party Note Servicing Company
This is one of the most overlooked value drivers in seller financed notes — and one of the easiest to implement.
A third party note servicing company collects your payments, maintains a verifiable payment history, handles year end tax forms for both you and your buyer, and manages all the administrative details of your note professionally.
Note buyers love third party serviced notes. Here is why.
A verifiable payment history from a professional servicing company is objective proof that your buyer has been paying on time. It is not your word — it is documented evidence from a neutral third party.
That documentation directly increases your note's value. A note with 24 months of verified on time payments from a professional servicer is worth significantly more than a note where payments were made informally between buyer and seller with no third party record.
The cost of note servicing is minimal — typically 20 to 35 dollars per month — and the value it adds to your note far exceeds the cost. You can even make this charged to the borrower each month.
Let Your Note Season
Seasoning is the length of time your note has been paying. The longer your buyer has been making on time payments the more proven the payment history and the lower the risk profile of your note.
A brand new note with no payment history is higher risk than a note with 12 months of clean payments. A note with 24 months of clean payments is worth more than one with 12. Every month of on time payments adds value.
The key is that your buyer's credit should not drop during the seasoning period. A long payment history combined with stable or improving buyer credit is the combination that commands the best pricing.
Do not rush to sell a new note. Let it season. The premium pricing that comes with seasoning is worth the wait.
Work With An Experienced Note Buyer
When you are ready to sell your note work with an experienced note buyer — not a wholesaler.
Wholesalers buy your note at a steep discount and resell it to institutional buyers at a profit. You lose that spread.
An experienced note buyer who works directly with high level capital and brings 30 or more years of note valuation expertise to the table. They can evaluate your note accurately, explain exactly what is driving the price, and give you a fair number based on the actual risk profile of what you are holding.
At Moxxie Asset Group we bring over 30 years of seller financing expertise to every note evaluation.
The Bottom Line
Premium pricing on a seller financed mortgage note does not happen by accident. It happens because of decisions made at the closing table — and decisions made in the months and years after closing.
Use an RMLO. Get strong buyer credit. Require a meaningful down payment. Set an above market interest rate. Choose a 15 to 20 year amortized term. Sell to an owner occupant. Use third party servicing. Let it season.
Do all of these things and you create a note that commands the best possible pricing when you are ready to sell.
Ready To Find Out What Your Note Is Worth?
Call 352-99-LEARN (352-995-3276) and Our Senior Seller Financing Advisor, Dawn, will personally reach out to discuss your note's value and what is driving it.
Or CLICK BELOW fill out our online worksheet at:
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No cost. No obligation. No pressure. Just an honest conversation about what you are holding and what it is worth.
About Moxxie Asset Group
Moxxie Asset Group works exclusively with seller financed mortgage note holders across the United States. We help note holders understand exactly what they have, know all of their options, and make informed decisions, whether they ever plan to sell or not.
Want to know what your note is worth right now?
Call 352-99-LEARN (352-995-3276) and our Senior Seller Financing Advisor Dawn will personally reach out to discuss your note's value and options. There is no cost, no obligation, and no pressure, just an honest conversation about what you are holding.
