Can You Still Buy Without a Fixed Mortgage?

Buying a house doesn’t necessarily require getting a 30-year, fixed-rate mortgage.

More and more people are exploring alternative financing plans as it gets harder to get a conventional bank loan.

Here are some creative ways to pay for a home, according to some financial experts:

  • Securities-backed loans. The lender gives the borrower 80 percent of the value of his stock portfolio. Then the lender holds the stock for between three and 10 years while charging a 3 percent to 5 percent interest on the loan. At the end, the borrower gets his original shares back. Both win if the stock has increased in value.
  • Two-step mortgages. This fixed rate mortgage is amortized over 40 years, but the payment schedule is adjustable.
  • Constant-amortization mortgage. Buyers start with a higher payment, but the loan is constantly re-amortized, so principal is reduced faster than with a conventional loan.
  • Family loans. In the most successful arrangements, the family puts the agreement in writing and the lender charges the borrower a rate of interest high enough to pass IRS scrutiny, thus avoiding any gift tax.
  • Assuming a mortgage. Buyers interested in purchasing a house in the pre-foreclosure stage might ask the lender if they can assume the mortgage. In some circumstances this can be a good deal.

Source: Forbes, Matt Woolsey (01/26/09)

Mortgage Fraud Crackdown Continues

The FBI was instrumental in 206 convictions in 2007 for real estate securities and commodities fraud.

According to an FBI report released Thursday, the 1,204 mortgage fraud cases pursued in 2007 resulted in 321 indictments and court orders for $595.9 million in restitution.

The FBI, working in conjunction with the Securities and Exchange Commission, is investigating more than 1,300 mortgage-fraud cases and conducting 19 corporate investigations linked to the subprime lending crisis.

Source: The Associated Press, Marcy Gordon 05/22/08