Beware of Option-ARM mortgages. They are heavily promoted, but should rarely be used. I recently received an email that perfectly illustrates how overly zealous mortgage brokers push these dangerous products. Knowing their deceitful tactics will protect you.
The difference between taking blind chances and taking calculated risks is knowledge and experience. When a professional takes a stroll across Niagara Falls on a tightrope, what seems like a terrible risk to observers amounts to a walk in the park to him; because he knows what he is doing, and has done it before. The same principle applies to buying, financing, selling, fixing, and managing houses. Why do you suppose so few brokers actually buy/sell/rent their own houses versus entrepreneurs? I think it’s because listing, selling, and managing houses for a fee incurs no risk of money or credit; while investing and lease/Optioning does.
“Well the doctor is in! First, you are absolutely correct in your take on the situation. This investment philosophy is being heavily promoted by some ‘wealth management’ strategists because of the commissions it generates. The only thing that surprises me is that Mr. Zealous was only suggesting you take out $100k (why not more?) and that he isn’t suggesting you put it into an equity-indexed annuity or equity-indexed life insurance!
Shop around to get the best possible deal. Have each lender fully explain their loan products so that you understand what they are offering. Be specific with your questions and ask them to explain anything you don’t understand to your satisfaction. Ask about the length or term of the loan, closing costs, other fees, and the interest rate.
The lender is paid additional fees. Knowing what these are and comparing them is part of making sure you find the cheapest loans. You might have to pay the lender for underwriting the loan, processing it, preparation of documents and a courier. If you engage the services of a Mortgage Broker youll have to pay her or him as well.
The mortgage lenders set the borrower with less than twenty percent down payment. In return, the borrowers pay for the PMI premiums. In the past, the borrowers pay the PMI lump sum on the closing. Over the years, the PMI is spread out to the life of the mortgage.
Do not settle on the first attorney you call. You need to interview a number of them and pick the one that you are most comfortable with, who has the best referrals, and who seems the most knowledgeable about what you are doing. There are a lot of attorneys out there who will shoot down your ideas just because they don’t understand the law.
If you fit one of the first two groups, then you are doing the right thing by searching for a no income verification mortgage loan, but if you don’t fit either of those groups you need to avoid this type of loan. Don’t get talked into something that is going to put you into financial hardship and always make sure the loan is the right one for you.