When you know what every mortgage lender has to offer, get the best deal that you can. On any given time, mortgage lenders & brokers may offer different prices for the same loan terms to different persons, even that those consumers have the same qualifications. Most likely the reason for this difference in price is that officers and mortgage brokers are many times allowed to keep some or all of this difference as extra compensation. In general, the difference between the lowest available price for a loan and any higher price that the consumer agrees to pay is an overage. When overages exist, they are built into the prices given to borrowers. They can occur in both fixed & variable rate loans and can be in the form of fees, points, or interest rate. Whether quoted to you by a loan officer or a mortgage broker, the price of any loan may contain overages!

Ask the lender or broker to write down all the costs part of the loan. Next ask if the lender or broker can waive or reduce one or more of its loan fees or agree to a lower interest rate or fewer points. You don't want that the lender or broker is not accepting to lower one fee while increasing another or to lower the interest rate while raising points. Don't be shy asking lenders or brokers if they can improve terms or can give you better terms than those you have found elsewhere!

Once you are happy with the terms you have negotiated, you may want to obtain a written lock-in from the mortgage broker or lender. The lock-in should include the interest rate that you have agreed upon, the period the lock-in lasts, and the number of points to be paid by you. A fee may apply for locking in the loan rate. This fee may be refundable at closing though. Lock-ins can protect consumers from rate increases while your loan is being processed; if rates drop, for example, you could end up with a less favorable rate. In case that will happen, try to negotiate a compromise with the lender or broker.

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Hard money lender real estate loans provide borrowers with poor credit the chance to purchase a home. These types of loans are considerably more expensive than traditional home loans financed through mortgage lenders. This type of financing is intended for interim use while borrowers rebuild or establish a credit history.

Hard money lender real estate financing is also used by investors to purchase commercial properties or realty intended for house flipping. Investors sometimes use this type of financing to buy properties that are not in marketable condition because this type of realty does not qualify for conventional financing through banks.

Hard money loans are referred to as 'bridge financing' because they bridge the gap for individuals who do not qualify for funding through a mortgage lender. Bridge loans can be used in addition to conventional loans and are often used with seller carry back financing.

Seller carry back is a lending option that helps individuals buy real estate by combining bridge loans with conventional mortgage loans. The property owner provides a portion of financing for one to two years and the balance is financed through a bank, credit union or mortgage lender.

For example, the Seller lists his property at $250,000 and offers to carry back 40-percent financing, or $100,000. The buyer obtains a conventional home mortgage loan for $150,000. The buyer has two mortgages against the property. The bank carries the first mortgage and the seller carries the second mortgage. Carry back financing is generally limited to 70-percent maximum of the property's current market value.

Interest rates applied to bridge loans are substantially higher than interest applied to conventional home loans. Private financing interest rates are regulated by state usury laws. On average, bridge loans are charged an interest rate of 11- to 21-percent. At present, Florida has the highest usury rate which is capped at 25-percent.

Seller carry back real estate contracts often include default clauses which allow sellers to increase interest rates if borrowers become delinquent with loan payments or default on the loan and enter into foreclosure. Default interest rates can soar as high as 29-percent. Buyers can determine maximum hard money loan interest rates at UsuryLaw.com.

The amount of interest charged with bridge loans can vary depending on the amount of borrowed funds, as well as the funding source. Private real estate investors generally charge a lower interest rate than investment groups. Hard money loans for residential property typically carry a higher rate of interest than commercial property loans.

Bridge loans sometimes include a prepayment clause, penalizing borrowers who pay loans off early. One primary goal is to refinance hard money loans through a conventional mortgage lender as quickly as possible. A six-month prepayment clause is tolerable, while a two year penalty clause is unacceptable. It is highly recommended to consult with a real estate lawyer before entering into hard money borrowing.

Overall, hard money lender real estate loans are not the preferred method for financing. However, bridge loans allow borrowers with less than perfect credit the opportunity to buy a home and provide funds to investors for residential and commercial investment properties.


Are you one of the millions of Americans who has been contemplating a home mortgage refinance? Perhaps you have lost your job, or had to take a cut in pay. You might not be able to sell your house in the current real estate market and are now facing foreclosure. These are all the scenarios for which President Obama enacted his "Making Home Affordable" plan.

What is "Making Home Affordable"?

What this package has done for the American homeowner is to loosen the restrictions on home mortgage refinance options. It has also required banks to allow for mortgage modification in certain circumstances. Many of those who own a home and are in the midst of a difficult financial situation are eligible for this program.

The president's goal in enacting this piece of legislation was to ultimately provide a positive effect on the real estate market. He is also hoping that the millions of citizens negatively affected by the recessionary economy will find relief, and be able to avoid foreclosure.

The Making Home Affordable plan is part of the $75 billion bailout package which was approved by Congress. Mortgage companies are being given incentives in order to minimize their risk while modifying current mortgages or approving new ones. This is good news for homeowners, or potential homeowners, who will find they now have many more options for mortgage loan terms and the number of lenders who are willing to work with them.

What the Making Home Affordable Plan Can Do For You

If you were previously considering a home mortgage refinance but found that it didn't make sense financially, or was impossible due to restrictions placed by the lender, then it may be the perfect time to revisit this option.

According to the package, homeowners are eligible to modify the terms of their mortgage so that the monthly payment equals 31% or less of their gross income. Because of economic woes and the failing real estate market, many Americans are now paying up to 50% of their monthly income for their home alone.

Banks and mortgage lenders have received a set of guidelines as part of the Making Home Affordable plan. They can offer a 2% mortgage rate, if that will help reduce the ratio of payment to income. Cash incentives from the government will help pay for this reduction.

For the homeowner who is looking for a home mortgage refinance, they must first qualify to be eligible under this stimulus plan. They must be current on their loan in the last year and must not have made any payments more than 30 days past due. They are required to sign a letter of Financial Hardship stating that their income has been reduced, for whatever reason, in order to qualify for the 2% interest rate. If the property value has fallen by 15% or more, than the fixed 2% rate may also be an option. Anyone who financed their home with Freddie Mac or Fannie Mae is eligible for modification.

Under the terms of the Making Home Affordable package, a home mortgage refinance might now be a very realistic proposition, as well as a sound financial decision. Act now to find out what your options are and if you qualify to save thousands of dollars annually with a lower mortgage payment.


As mortgage rates have consistently held themselves around 5% for fixed loan products, the idea of refinancing to a lower rate has appealed to many home owners. Traditionally, obtaining a lower rate should lower the monthly mortgage payment. In many real estate markets, home prices have been falling making it more difficult to obtain a new mortgage as proposed loan amounts to the home value ratio has changed significantly. Additionally, credit policies with lenders have also changed making it even more difficult to obtain a mortgage.

While most borrowers will stay in their current mortgages, refinancing in a "difficult" market can improve your financial health in different ways.

1) Use home equity to pay down consumer debts.

Credit card companies are taking advantage of consumers who have outstanding balances. With interest rates around 20% in many cases, using home equity to eliminate consumer debt is a smart move in a calm real estate market.

2) Fund a retirement plan using home equity.

There are many investment opportunities available that will put your home equity to work in a tax free retirement account. Many mutual funds are available that are paying significant dividends and are attractively priced. Take advantage of quarterly and annual dividends for your retirement account as keeping the majority of your money in real estate can be risky. If your 401k has dipped, being proactive about increasing the value of retirement accounts is a smart move.

3) Avoid refinancing on condos or co-ops.

Guidelines for refinancing on these types of properties are stricter than ever. Making a drastic move into a new mortgage could diminish the possibilities of a future refinance. Lenders are tightening up on how much insurance buildings must now carry, its occupancy rate, and how much space the building can use for commercial purposes. As changes are being made in this market, its safer to keep your existing mortgage before locking in on a new loan where changing guidelines can negatively affect your financial strength.

Remember, mortgage financing strategies are contingent on how long you plan on staying in your home. Leveraging your mortgage to increase cash flow and your overall financial health is wise, but there may be long term consequences if you greatly reduce the equity in your home. Many lenders prefer keeping 20% of your own equity within the property before considering a mortgage refinance. Programs and policies will vary, but using home equity to your advantage has never gone out of style.


Whether your are obtaining a mortgage for your first home, or your tenth in a series of real estate investments, the type of mortgage you choose will have a lasting impact. The consistency of your payments, the amount of interest you pay, and the amount of money you put down will all affect your decision. Here's a quick glossary of the terms you need to know.

Fixed vs. Variable Mortgage Loans

The standard 30 year fixed real estate mortgage isn't so standard anymore. It's still extremely popular because you can lock in a one-time interest rate that will stay consistent over the life of your mortgage. But this doesn't work for everyone, which is why the other real estate mortgage options have evolved.

The variable mortgage, also called an adjustable rate mortgage (ARM), or floating mortgage, is often attractive because the payments and interest rates can be significantly lower. The problem is that the interest rate will fluctuate along with the prime lending rate. This means your mortgage payment could increase at any time. This is a good option only if you know you can handle the jump in payment without consequence.

Interest Only Mortgage Loans

If you have ever looked at the amount of interest and principle paid on an actual real estate mortgage payment, then you know why interest only loans are so popular. Someone who pays $1,250 monthly, at a 5.875% interest rate, is actually making a payment of about $670 to interest, $400 to escrow, with only $180 going towards paying off the principle of the loan. By paying off the interest in the early years of the loan, your monthly payment will be significantly lower. A traditional mortgage would require that additional payment to principle each month.

While your payments with an interest only real estate mortgage loan are guaranteed to jump once the interest is paid off, this can work towards your advantage in some situations. For instance, a young person just starting out in a career may expect to be making more money by the time the monthly real estate payment increases. Also, the flexibility can allow you to borrow more money, or create more cash flow in your real estate investment, in those early years.

On the down side, you don't accrue any real estate equity when you're not paying off the principle amount owed. Also, the unpredictability of the real estate market makes this a riskier loan. Most financial advisors also counsel against taking out an interest only loan if you can't afford the house without it.

Negative Amortization

A negative amortization loan is most often used in areas where real estate costs are very high, with the goal of helping people who could not otherwise afford to buy into the area. Basically, the real estate lender agrees that the mortgage holder will pay less than the amount of interest due each month for a short, usually 5 year, period of time. The owed amount is tacked on to the remaining real estate loan at the end of that period. Also known as a deferred interest or Graduated Payment Mortgage (GPM), this is considered risky since the "jump" at the end of the lower payment period will be significant.

Balloon Mortgages

Balloon Mortgages have inspired come controversy in the real estate industry, because some shady real estate professionals have advised them inappropriately. With a balloon mortgage, you pay a fixed rate for a specified period of time (5/7/10 years) and then pay off the remaining principle in a lump sum when that time is up.

Balloon mortgages are attractive because the interest rates are usually lower. One way to use a balloon mortgage for your real estate purchase is to take advantage of the lower interest rate, and then attempt to refinance at a low fixed rate at the end of the term. This is especially appealing when interest rates are high. Just remember, have a plan, and a back up plan, for paying off the final amount if you are thinking about a balloon mortgage.

The best advice is probably to talk to someone you trust who has a good real estate background, and who can assess your specific situation. Every real estate transaction is different, and so are your mortgage needs.