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Stretching Your Loan Qualification? Which Mortgage Is Best?
Stretching Your Loan Qualification?  Which Mortgage Is Best?
 
Buyers will come to us, often after beholding the perfect home while out touring with their Realtor, and they will want to know the maximum amount they can borrow on a mortgage.  Perhaps they just intuitively realize that their dream home will stretch the outer limits of affordability.  Their question will be, "What is the maximum amount I can qualify for on a mortgage?"
 
At this point, they may ask about interest-only (I/O) loans or ARM programs to help them achieve their target purchase price, so let's play a little game of "Truth or Delusion" and cover some of the common scenarios:
  
1)  "I'll just use an interest-only loan and qualify with the lower payment.  Problem solved!"
Delusion.  Your favorite regulators in Washington decided years ago that interest-only payments are a "toxic feature" in the new world lending order.  As a result, lenders may still make an interest-only loan, but if they dare do so, they had better prove beyond a shadow of a doubt (actually beyond a rebuttable presumption...but that's another story) that the borrower has the ability to repay.  The way they attempt to do this is by using a qualifying payment --- behind the scenes  --- that is artificially high.  They figure that if ... more

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