Mortgage Trivia

Financing a Small Business

Margin Accounts

Refinance Before Selling

Bankruptcy

Premium Mortgages

Foreclosure

Late Payments

Down Payments and Credit Scores

Investment Properties

Pre-Payment Penalties

Paying Interest

Pay Options ARMs

Financing a Small Business
When you need money for your business, the Small Business Administration (SBA) recommends that you should always use the equity from your home instead of applying for a business loan, because your business loan will also always have a higher interest rate than a good, creative mortgage. A bank will normally ask you to put up your home as collateral anyway.

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Margin Accounts
As an alternative to having a margin account, cash out the equity from your home. Margin accounts are called when stocks dip, and with the proper mortgage program you can get cash out and lower your monthly payment.

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Refinance Before Selling
If you are thinking of selling your home, refinance it before you list it to get the cash needed for the down payment for your next purchase. No bank will touch a house listed for sale, and bridge loans are extremely rare and costly. Underwriting requirements in recent years have become increasingly flexible with 100% financing and allowing pending sales, making bridge loans impractical.

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Bankruptcy
You can get a mortgage with a bankruptcy. You can even get a mortgage before you are discharged.

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Premium Mortgages
To get a premium mortgage product, you only need to be out of bankruptcy for 24 months. Mortgage underwriters only look at a 2 year credit history, whether it is bankruptcy, foreclosure or late payments.

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Foreclosure
Foreclosure is far worse than bankruptcy in mortgage credit. You are better off selling your home to an investor on those signs you see around - the ones where "we buy houses" - just to break even on your liens instead of allowing your home to go into foreclosure.

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Late Payments
Mortgage companies only consider your mortgage payment late in 30, 60 and 90 day increments. In other words, you are only late after the 30th day. If you go 29 days late, it will not show up on your credit report. A late mortgage payment is taken the most seriously compared to other possible lates on your credit report such as credit card or car payments.

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Down Payments and Credit Scores
You do not need to have money to put down or perfect credit to buy a home. 107% financing is available, meaning that 100% of the purchase price and the closing costs are financed in. In some cases, you can even walk away from the closing table with up to $500 in your pocket. 100% financing is even possible for credit scores in the 500's.

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Investment Properties
100% financing is available on investment properties. If $1,000,000 in real estate increases in value by only 10%, you have gained $100,000, not including rental income.

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Pre-Payment Penalties
Predatory Lending laws took effect in October 2003 in New Jersey, forbidding pre-payment penalties. If a company is federally chartered, however, it can still impose a pre-payment penalty. Be careful, and always ask if there is one. The penalty is usually 2% of the remaining loan balance. Even if you have a penalty, it can be negotiated down and eliminated by paying points. Unscrupulous loan officers have also been known to add pre-payment penalties at the bottom of closing documents in an "Addendum to the Note," so check your paperwork.

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Paying Interest
On a 30 year fixed program, 90-95% of your monthly payment goes towards interest for the first 15 years, making the bank rich. On a $2,500 payment, less than $200 goes towards principle.

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Pay Options ARMs
A newly popular program is called Pay Option Arms. A $500,000 loan amount has only a $1,500 monthly payment with this program, which is available for both cash out and purchases.

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