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As the market place becomes more and more competitive, some lending institutions must
scramble to get their mortgage money out. The demand for mortgage money is strong, so for
the mainstream lenders this is not a problem. Fringe lenders however need innovative
products to get rid of their deposit money. Lending institutions as a whole take in
money from Consumer deposits. If the money just sits in the lenders coffers, no
interest is made therefore none can be paid to the deposit holder (Consumer). Fringe
lending institutions try to find a niche in the market place so they can get their money
out, and hopefully get it back. Let me share some new products with you:
NO INCOME QUALIFIER
Some Consumers don't make the income necessary to qualify for the amount of mortgage they
require. Their credit may be excellent, their job stability may be admirable, but
their visible income is too light. With 25% down, five year mortgages are available
as low as 7.99% As an example, let us suppose Frank makes $35,000 per year.
His alternate payment debt load (other than the mortgage payments) accounts for 10%
of his annual salary. He wants to buy a $150,000 home with $40,000 down. If you go
to my website, you can calculate the maximum mortgage for Frank at around $78000. He
needs $110,000 (that's $150,000 purchase price less $40000 down). Most lending
institutions would reject the application even though his credit is perfect. Frank can now
pretend he makes enough money to qualify, because of his excellent credit and his down
payment. With only 20% down, the interest rate would climb to 8.95%, and with 15% down,
9.99%. These latter two sources of money also charge a fee that would be roughly
equivalent to the fee you should be paying to Canada Mortgage & Housing.
NO MONEY DOWN
For years Consumers have read books and watched TV pitchmen announce 100% financing.
It was always difficult to get one lender to do the financing, unless that lender
wanted to "unload" one of its own properties. Although I have
provided this service for some time, I always had to break down the financing into three
distinctive parts: 75% first mortgage financing, an additional 15% by way of a second
mortgage, and finally the last 10% by way of an unsecured line of credit. The rate
of interest and the amount of payment was always tough to swallow, because of the short
amortization on the line of credit portion. Today, 100% financing is available to
potential home owners with impeccable credit and a good salaried job. The interest
rate is below 10%. As an example, Anita has been with a high tech firm for 4 years.
She has received shares of the company as part of her income for the last three
years. As long as she keeps her shares within the Company, the Company will match
whatever shares she has on December 31 each year, as a bonus. She wants to buy a
house but if she collapses her shares for the "normal" down payment, no more
bonus! This is an ideal situation for 100% financing, on one mortgage. She can
keep accumulating her shares, move into the house without a down payment, and when she has
enough shares to payoff the house she can do so. The debt service ratio with this
lender is also higher than the norm at 40% of gross income.
ALL INCLUSIVE MORTGAGE
Another lender offers to pay for your legal fees, appraisal fees, land transfer tax, and
normal closing costs at a five year rate of 7.94%. In other words, you need only the 5%
down, the rest of the stuff is already paid.
Next week, more innovative products!
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