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Non-Taxing Loans

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Posted On: 02/10/2010

QUESTION: Can I get a mortgage without showing tax returns?

ANSWER: With "no doc" and "no ratio" loans it used to be possible to obtain mortgages without showing tax returns or much else to lenders. Such applications today are very difficult to get without a huge down payment and a sky-high credit rating. Lenders can tell you more, but with millions of foreclosure notices going out annually the odds are that you'll be showing lenders lots of paperwork.

QUESTION: As sellers we have agreed to pay $5,000 in buyer closing costs. If the buyer's closing costs are $4,000, will we get back $1,000?

ANSWER: You need to see what the sale agreement actually says. There's a difference between a $5,000 "seller contribution" to the buyer and a promise to pay "up to" $5,000 in buyer closing expenses. In the first case the credit is $5,000 while in the second case it could be less than $5,000 but not more. For specifics, speak with your broker or attorney.

QUESTION: Can I buy an investment property with FHA 203(k) financing?

ANSWER: The type of loan you seek would allow you to first buy property and then have funds to fix it up. The 203(k) program is attractive because acquisition and repair money comes in one loan so you shouldn't need additional financing. Unfortunately, the program has been off-limits to investors since October 1996.

QUESTION: What do lenders mean when they say my loan will "recast?"

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ANSWER: Adjustable-rate loans can be recast in two situations: First after the loan's "start" period and then every few years thereafter to assure that monthly payments are sufficient to repay the debt over the loan term. If the mortgage allows "negative amortization" then the mortgage payments also can be recast after the debt reaches 110 or 125 percent of the original debt. Beware: "neg am" loans that recast can produce steep monthly costs - sometimes double current payments.

Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to peter@ctwfeatures.com.

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