Cash is King – Upside Down Mortgage Solutions

December 4, 2008

Adjustable Rate Mortgage and Stated Income Loan: How to Handle the Adjustable Part

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Let’s roll back the clocks a bit!

Say it’s 2003 and the Real Estate Market is hot as every.  People are buying up new properties moving up, down and sideways.

From a financing point of view, people were refinancing and buying new homes at an incredible pace and at the best interest rates in years. It was common

A simple loan called the Stated Income Loan was being used all over the place to help people either refinance or purchase those large homes.  Many of these loans were adjustable rate mortgages to help lower the interest rate and keep the payment low.

A Stated Income loan is simple to explain.  It allows a high asset holding and excellent credit buyer or borrower to simply put whatever income they wanted on their loan application in order to qualify.  Sounds interesting, no wonder why they call it the liars loan.

Now I want to point out that this loan WAS misused but the original intent of this loan was to be for those high-income earning or self-employed individuals who couldn’t show on their tax returns the required amount of income to qualify for their loan.  Most self-employed people have large amounts of write-offs on their tax returns leaving little to help them qualify for a new loan.  As long as there were assets lenders were willing to lend.

Now this sets up things in the current market.

We have seen property values dip and lending guidelines go from loose to beyond tight.

The Stated Income Loan is a thing of the past and has been eliminated almost entirely.  Even if there were options the interest rates on these types of loans would be extremely high and almost unaffordable.

The government has rolled out help for many homeowners but Self-Employed people are stuck in their loans for a variety of reasons but the biggest dilemma they have is that their loans are mostly adjustable and will increase when their fixed period ends.

This brings up a question, if lending guidelines have tightened some much and there are no longer loans available for people in this category what solutions do they have?

The answer isn’t overly complicated just not what you would expect.  The solution is in the hands of the existing lenders or those who currently hold the loan.  They will have to help these homeowners by way of a Loan Modification.

A Loan Modification will adjust the terms of the existing loan to make it affordable to homeowner.  There are rules that a typical a lender would look at to qualify these folk but this may be far easier than an actual refinance.  Worst case would be a 5 year freeze on the interest rate which doesn’t completely solve your problem but will put it on hold for quite a while.

Another area you could look into is finding your local short sale agent to help you figure out how to get out from under your mortgage.  This is far better than giving up and walking away.

To start the Loan Modification Process you simply need to email me at brent[at]brentlane.net

Read here about Short Refinancing

California Refinance


Steven Chu

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4 Comments »

  1. […] Let’s roll back the clocks a bit! Say it’s 2003 and the Real Estate Market is hot as every.  People are buying up new properties moving up, down and sideways. From a financing point of view, people were refinancing and buying new homes at an incredible pace and at the best interest rates in years. It was common A simple loan called the Stated Income Loan was being used all over the place to help people either refinance or purchase those large homes.  Many of these loans were adjustable rate mort The whole story…. […]

    Pingback by Mortgage Refinancing - Adjustable Stated Income Loan: How to Handle the Adjustable Part : UpdateMortgage — December 4, 2008 @ 6:14 pm | Reply

  2. I just discovered your blog today and I really like it. I have a brand new online budget keeping system. If you want to check out my website, it’s http://www.simplymybudget.com

    Comment by Kristin Collins — December 8, 2008 @ 10:38 pm | Reply

  3. I think the best way to deal with an adjustable loan is to get out of it! Refinance now into a fixed rate loan while interest rates are at an all time low. Check my site http://www.refinancingcondo.com for more info on refinancing. Thanks

    Comment by M Petrone — December 13, 2008 @ 1:20 pm | Reply

  4. 2CF0hp comment3 ,

    Comment by Ayyfvmla — May 8, 2009 @ 10:32 am | Reply


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