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Today's new consumer article is Earnest Money: Copy of a Check or Proof Of Funds?, talking about what good various sorts of evidence of deposit do.

Today's new consumer article is Mortgage Accelerators, Money Merge, and Paying Your Mortgage Down, which deals bluntly with the contention that these programs that allegedly "pay off your mortgage in a fraction of the time" actually help. They don't. I have yet to find one where you're not better off simply taking the sign up money and using it to pay your mortgage down.

Today's new consumer article is Personal Loans For A Real Estate Down Payment, which discusses an uncommon but doable alternative for rapidly acquiring a down payment. It has significant downsides even if done correctly, and if you do it wrong can stop you from qualifying for a loan at all, but it can work.

Today's new consumer article is The State of the Loan Market and How Much You Can Borrow September 2008 (Part II), which discusses the loan market and the state of lender paranoia that currently prevails, and the possible solutions to the problems raised yesterday.

If you are one of those who can qualify for a loan, the fact that a lot of other people can't is an excellent reason to buy now.

Today's new consumer article is The State of the Loan Market and How Much You Can Borrow September 2008 (Part I), which discusses the loan market and the state of lender paranoia that currently prevails.

If you are one of those who can qualify for a loan, however, the fact that a lot of other people can't is an excellent reason to buy now.

Today's new consumer article is What Do Loan Qualification Standards Accomplish?, which talks about the good that having and adhering to standards of qualification does, and the problems it avoids for all concerned.

Today's new consumer article is What If You Cannot Refinance Later?, which addresses a very real concern that there are many reasons why people may not be able to refinance their property at a later date, so even though the currently available loans may not save you any money now, moving from an unsustainable loan to a sustainable loan now will save your bacon later.

Today's new consumer article is Loan Qualification Standards: Qualifying Rate and Payment, which talks about how the calculations that determine whether or not you qualify for the loan you apply for.

Today's new consumer article is Conforming and Jumbo Only Apply to "A Paper" Conventional Financing, a discussion of the root differences between A paper, government loans, and subprime.

do you agree that a non recourse loan on a single family home is loaned with out financial risk to the borrower... if they do not want to keep their home when the market drops below what they owe, they can walk away with immunity to any financial loss & the most the lender can do is take back the home, & if the borrower has made all their payments on time & have returned the home in the same condition as when they moved in, their credit will not be negatively, by the lender??? my reference is http://wwlaw.com/forecl.htm

Yes, it is true that purchase money loans are largely non recourse in California. However, I do not agree that there is no financial consequence.

First off, there are credit repercussions for up to ten years. Among other things, this will make it more difficult for the buyer to rent the next property they will live in, as well as making it more difficult to obtain financing on the next property they want to purchase, when they really are ready to join the grown-up world.

Second, just because the lender cannot seek a deficiency judgment does not mean that the IRS will not tax them for debt forgiveness. If the lender loses $50,000 in debt forgiveness, they will report it to the IRS, because they want that deduction from income. The IRS will then tax the former owner whatever tax would be due upon the residence. Income from debt forgiveness is ordinary income, and it is fairly likely to boost the taxpayer up in tax bracket in such a case. So now they have to come up with thousands of dollars. If they had those thousands of dollars, they probably wouldn't have lost the property. So now the IRS is looking for other ways to get their money: attaching wages, confiscating other property, etcetera.

I should also note that there are all kinds of exceptions to the law limiting deficiency judgments for purchase money loans. Fraud is one such limitation; if the buyer had to state more income than they in fact make, that would certainly prove to be an interesting case. I don't do it, but that doesn't mean it never happens. Furthermore, just because the buyer doesn't fall into one of the exceptions does not mean the lender will not contend in court that they do. The law doesn't actually prevent the lender from seeking a deficiency judgment; what it says is that they're not entitled to one if certain conditions hold. Proving that proposition in court is expensive, and the lender can always hope that you simply default by not showing up or something similar.

There are very definitely negative consequences. Buying a property is a complex decision, and should not be done lightly, on the basis of "Walk away if it doesn't work out." The consequences, even if not direct, spread out like ripples in a pond when you drop in a stone. Real estate is a fantastic investment, properly approached. With the tax code and the way leverage works, among other things, it trivially beats anything of equivalent risk for potential reward, or alternatively, beats anything of equal potential for reward as far as low risk. But that risk is not and never will be zero. Indeed, it cannot be. Real estate isn't liquid, and you never get to play with someone else's money risk free. That's two of the many reasons why you need competent professionals on your side.

Caveat Emptor