- 1). Ask the buyer to complete an application and sign a credit check approval form. Remember that you are acting as the bank; requiring a thorough application, including checking credit, is wise. A buyer should be forthcoming about his credit and financial background.
- 2). Run the buyer's credit histories from the three main reporting bureaus: Equifax, Experian and TransUnion. If your buyer states that he cannot secure a traditional loan, the answer why may be in his credit report. Note the frequency and duration of delinquencies, and the presence of a bankruptcy, foreclosure or short sale. Discuss issues with the buyer.
- 3). Review documents that support the buyer's assertion that he can afford the property payment, such as pay stubs and bank account statements. Underwriting guidelines state that a housing payment shouldn't exceed 29 percent of gross income, and total debt payments shouldn't exceed 41 percent. Ask your buyer how he plans to afford to refinance.
- 4). Tell your buyer that you would like to establish an escrow account to ensure prompt payment of property taxes and hazard insurance. If you hire a mortgage servicer, the servicer can establish escrow for you.
- 5). Discuss default remedies with the buyer in advance; make sure he knows that you have foreclosure and forfeiture options available to you.
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