Index
Accessory apartments, 41-42, 262 Adjustable rate mortgage ARM , 51-54 Alternative documentation, 100 Appraised value, 198-200 Appreciation, 229 APRs annual percentage rates , 94-96, 190-191 ARM adjustments, 92 ARM affordability, 77 ARM assumables, 57 ARM baseline, 92 ARM caps, 92-93 ARM conversions, 93-94 ARM index, 88-90 ARM margin, 91-92 ARM risks, 73-74 Assumable mortgage, 54-57, 79-80, 144, 153, 177, 196-198 Automated underwriting, 4-5 Bait and switch, 85, 209 Balloon mortgage, 155-156...
You can make your qualifying ratios look better
For many but not all loans, lenders judge your borrowing power through their use of two qualifying ratios the housing cost front ratio, and the total debt back ratio. Both the housing cost ratio and the total debt ratio give lenders a way to measure whether your income looks like it's large enough to cover your mortgage payments, monthly debts, and other living expenses see examples below . Run-of-the-mill loan reps will merely plug your financial data into their AU program. Savvy loan reps...
Never buy biweekly baloney
After closing a mortgage, some lenders go back to their borrowers to extract even more money. Preying on their borrowers' inability to perform compound interest calculations, these lenders promise to prepare a new early payoff system that will permit their borrowers to save thousands in interest for a small fee of just 395. Under these plans you pay 50 percent of your scheduled monthly payment 26 times a year biweekly instead of the full payment 12 times a year. Mortgage Secrets calls this type...
Second Mortgage Specialists
When possible, get sellers to carry back financing. But if the sellers cannot or will not assist with seller financing, turn to a lender who offers second mortgages. Here's what Eagle Mortgage says in a promotional brochure that this company mails to Realtors If you knew how to lower the monthly payments on a property purchase for your A credit buyers, while helping them build equity faster would you be interested enough to listen what if you could help your marginal B and C credit customers...
Seek employer assistance or seek an employer who gives assistance
In John Grisham's novel, The Firm Random House, 1991 , senior lawpart-ner Royce McKnight uses employer-sponsored, low-interest-rate home financing to help recruit Mitch McDeere into the law firm. As you know Royce tells Mitch , we require you to buy a home. It adds stability and prestige and we're very concerned about these things, especially with our associates. The firm provides a low-interest-rate mortgage loan, 30 years, fixed rate, non-assumable should you decide to sell in a few years....
FHA Drawbacks
FHA mortgages display two drawbacks. First, you'll pay FHA mortgage insurance premiums MIP to protect the lender should you fail to make your mortgage payments. This mortgage insurance initially will cost around 1.5 percent of the amount you borrow, such as 1,500 on a 100,000 mortgage. Remember though, if you don't have the cash, you can add this premium onto your mortgage loan balance. As another drawback, your loan interest rate will be boosted by one-half percent to cover additional mortgage...
Avoid the bang of a bursting balloon
Sellers who agree to carry back a second mortgage frequently insist on a payoff term of seven years or less. Some sellers want their money the sooner the better. From your view, a short-term second mortgage usually won't make much sense. The short term sends the monthly payments too high. But here's how to solve this problem. It's called a balloon mortgage. When you use a balloon mortgage, you make monthly payments and then pay the outstanding balance after maybe five or seven years. Say the...
Use pledged collateral to eliminate PMI
If you don't have enough money for a big down payment, and you can't or don't want to buy mortgage insurance or obtain a second mortgage, you've got another possibility. It's called pledged collateral. We don't care where the collateral comes from, says Elmer Frank of First American Savings. As long as we feel secure, we'll consider the loan. We've taken stocks, bonds, mortgages, retirement accounts, and once a Mercedes 300 SL Gullwing. We did, though, refuse to accept a racehorse.
Save s with a Mortgage Credit Certificate MCC
The mortgage credit certificate MCC can shave 1,000s off the cost of home financing. This tax credit is available in about 25 states. Although an MCC doesn't directly reduce your interest rate, it does help you qualify for a larger mortgage with lower payments by cutting thousands of dollars off your income tax bill. State and local housing finance agencies cooperate to sponsor MCC programs with selected mortgage lenders. An ad for the Massachusetts American Dream MCC first-time buyer mortgage...
Some Teasers Bait the Hook to Catch the Gullible and Desperate
As standard operating procedure, lenders advertise enticing ARM rates or monthly payments to make their phones ring. In response to such an ad for a 2.95 percent ARM, I called the lender. As it turned out, the loan did guarantee that I would pay the 2.95 percent interest rate during the first year. However, the mortgage was attached to the following gotchas. Negative amortization If the underlying index for the loan went up during that first year, the extra amounts owed would add to the...
Lift your qualifying income
We previously assumed that your qualifying income totaled 7,000 a month. That was simple. In the real world, lenders qualify you according to a variety of actual and potential income sources such as Rents received from rental units you own or are buying Look through this list. Is your total income set precisely Consider overtime, bonuses, commissions, self-employment, and tips. Over months or years, these amounts could jump up or down. Or think about unemployment insurance. How could someone...
Increase Your Borrowing Power
Okay, you realize that, to a much larger degree than most people believe, your borrowing power and your buying power depend on the knowledge you gain and the decisions you make. No genetic code predetermines your financial future. If one lender or loan program doesn't work for you, choose from multiple other possibilities. If your current finances show weak spots, reshape them to strengthen your borrower profile. If your income falls short of what you need, figure out ways to earn more.
lenders set their own standards
Some loan advisors claim that the big national mortgage companies, Fannie Mae and Freddie Mac, set underwriting standards for nearly all mortgage loans. Fannie and Freddie actually account for less than 40 percent of the residential real estate financing issued throughout the United States. A big number, yes, but hardly all-powerful. Moreover, Fannie and Freddie do not perfectly mirror each other. Both Fannie and Freddie publish underwriting guidelines, not edicts.1 Lenders who sell loans to...
Use compensating factors to justify higher qualifying ratios
In this age of automated underwriting, some loan reps forget that the qualifying guidelines within their software programs do not rule absolutely. If you fail some standard loan rule, you can still gain mortgage approval if you stress your compensating factors. What types of compensating factors will lenders consider Virtually anything positive that reasonably demonstrates that you will faithfully pay your monthly obligations. Here are a dozen examples 1. Your rent payments equal or exceed the...