Mortgages: June 2015 Archives

One of the casualties of the lending meltdown is the high loan to value second mortgage. With many properties locally having lost twenty percent or more of their value, a second mortgage on a property that ends up in default may well lose every single dollar the lender put into the loan. It shouldn't surprise anyone that lenders don't want to get into that kind of situation. Even though I (and most other credible analysts) are convinced that real estate is now undervalued, the money markets are still in fear mode over the money they have lost or are on track to lose.

The result is that lenders of junior financing aren't nearly so willing to go close to 100% financing any longer. Even when the same lender is lending the money for both loans, the people who underwrite the second mortgages are (usually) a different division. So when the property goes to foreclosure, the division who underwrote the first mortgage may end up with every dollar or nearly every dollar of their invested money, and they come up smelling like a rose. The division that underwrote the second mortgage that got wiped out and came out with 10 cents on the dollar loses their shirts, and everybody gets fired. I don't have one single subordinate loan program offering over 90% financing - doesn't matter the credit score or how much we can prove the clients make. The lenders have all decided they are not willing to accept the risks of a high loan to value second mortgage. That's their prerogative - they who have the gold make the rules for lending it. With the situation as I've have discussed, and second mortgage lenders in the process of losing every penny they put into loans, they understandably don't want to do it.

There was an alternative for quite a while. There were, for quite a while, still any number of lenders who would accept 100% financing on one loan with Private Mortgage Insurance (aka PMI). That has been gone for a couple years now. In fact, for a couple months it was really difficult to get financing over 85%, but then they started removing the declining market indicator in July 2008, and now it's pretty easy to get 90% conventional financing, and I have a couple of ways to get to 95%. Considering that FHA financing only goes to 96.5% and is far more difficult to get, this means that the difference between conventional financing and FHA is small in terms of down payment, and considering the premium FHA-eligible properties command, being able to go conventional may save you money despite a PMI rate that's higher than for government loans (VA loans have become the only widely available 100% financing)

Private Mortgage Insurance is an insurance policy that the borrower pays for but which insures the lender against loss. It does get the borrower the loan, but that is the only good the borrower can expect to get out of PMI. It does not prevent your credit rating from being ruined, it does not prevent any deficiency judgments that you may be liable for, and it definitely won't prevent the 1099 love note that tells the IRS you owe taxes on debt forgiveness. All it does is shift the entity that loses the money from the lender to their insurer, so that if you default, you'll be dealing with the insurer instead of the lender via subrogation.

What is going on here is that lenders are shifting the risks to insurers, who are in the business of taking risks via the Law of Large Numbers. Yes, the insurers know they will lose a certain number of these bets, but they are comfortable that overall they will make money at it. It is to be noted that lenders can improve their profit margins by self insuring, but they're not in the business of insurance. I'm certain some of them insure themselves in one way or another, but they isolate the risks away from their lending divisions, which are in the business of making money by loaning it out and having those loans repaid in full. When a lender loses a dollar because the loan wasn't repaid in full, that hits them where it really counts - bond rating, stock price, value of their mortgage bundles on the secondary market. When an insurer loses a dollar due to paying a claim, that's part of their daily business. They're in the business of paying claims, fully expecting premiums to more than pay for those claims.

As I said in One Loan Versus Two Loans, PMI is more expensive than splitting your mortgage into two loans, but when nobody wants to do second mortgages with less than ten percent down payment, the choices may narrow down to accepting PMI or not buying the property. The only other alternative that comes to mind is a private party loan, either in the form of a Seller Carryback (which comparatively few people are willing and able to offer) or the "good in-law" loans that were popular before lenders started liberalizing their standards in the 1970s.

(I haven't been in the business that long. I've never heard the phrase actually used by another professional, although I actually did a transaction that involved one not too long ago. I learned it from textbooks, as even in the early nineties when I both bought my first property and went back to college for my accounting degree they were a fading memory)

Paying PMI does have the net effect of decreasing the loan that potential buyers will qualify for, so this development should cause some small amount of additional downwards pressure in prices. For those interested in irony, the lenders are contributing to their own immediate losses by bailing out of the low equity financing market. People who have to pay a higher effective rate for the money can't afford to spend as much for a property, which means that current owners, whether they're borrowers or lenders, won't be able to get as much money for them.

One last thing before I finish. Don't get too hung up on the fact that you may end up paying PMI when experts (myself included) advise you not to. It's one of those voodoo words and concepts like "points", that people freak out about because they've been warned about them but they don't really understand. Just like points, many experts, myself included, often advise you not to pay PMI. But if you have one loan that is over 80% loan to value ratio, you are going to be paying PMI in one form or another. As I said in How Do I Get Rid of Private Mortgage Insurance (PMI)?, it can be a separate charge or camouflaged by being built into the rate, but you're still paying it. There are advantages and disadvantages to each choice, as I explained in that article. Choose your alternative with your eyes wide open and an understanding of the consequences, not because someone scares with with the voodoo phrase, "PMI."

Caveat Emptor

Original article here

HI, My name is DELETED and my husband and I are searching for a way to get out of our Negative ARM loan before we get upside down.

Our problem right now is our loan to value. Our loan right now is at $547,367.80 and is only getting higher. Our house just appraised at $620,000.00. We have a prepayment penalty of $20,000.00 and would just like to get that covered. We feel we need a Jumbo loan if possible.

Our wish is to get into a 40 or 50 year fixed. My husband makes good money and I will be working in a couple of months making a decent income. Right now I am doing temp work. We can afford payments for our mortgage if we were to refinance but we are having a hard time finding someone who will take the risk with us. If there is a risk. We are just trying to get out of this loan that is going to end up taking our house from underneath us. Our credit is good and I feel there is a way something can be worked out

Can you help us?

I will try, if you're in California. First, let's stop and think a minute about your situation and what will benefit your pocketbook, rather than mine.

If you pay the penalty, your new loan is going to be approximately $570,000, even without points. The issue is that neither I nor any other loan provider can get you a loan that isn't available. $580,000 is more likely, considering prepaid interest, etcetera, unless you have some cash to pay it down. $570k and $580k are both within the band of 90 to 95%, so I have to price it as a 95% loan to value ratio. 95% loans are problematic for jumbo loan amounts, and since your loan is neither owned by Fannie and Freddie nor underwritten to Fannie and Freddie standards, the 125% refinance program is unavailable to you. I don't have any such programs over 90% - but it turns out that I do actually have a refinance that can be done on a "jumbo conforming" up to 90%, albeit with PMI.

So suppose you don't have to pay the penalty? Now staying at or below 90% loan to value is a real possibility, and the loan can be priced as a 90% loan, giving better trade-offs. The way we might be able to do this is to check if we can get your current lender to refinance you. It'll likely mean renewing your prepayment penalty, but better that than paying $20,000 in penalty. Even if you end up with a higher rate than you might otherwise get because your lender doesn't have the lowest rates, $20,000 is almost four percent of your loan amount. Over the course of the 3 years of the new prepayment penalty (since that's standard for negative amortization loans), you'd have to save over a percent per year to break even with another lender. As I said in "Getting Out of Paying Pre-Payment Penalties", sometimes lenders will not require you to pay a penalty if you refinance with them and accept a new penalty.

In short, if we check with your current lender first, we might save you $20,000 cash plus the interest on it. So let's figure out who your lender is and ask.

The second alternative is to find out how long until the penalty expires. Make at least the full interest payments every month until your payment expires. How long do you have left on the penalty? If you've only got six months or a year left, rates just weren't low enough when I originally wrote this to make it worth your while refinancing, especially Jumbo loans, which even if your loan to value ratio was below 80% would have still cost you nearly two points for a 7% loan. If you pay at least your current "interest only" payment, you're not getting in any deeper. When the penalty expires, maybe rates and the market will be in better shape and you'll get a better loan. Matter of fact, waiting was a moderately good bet that would have paid off back when I originally wrote this, especially as opposed to just flushing $20,000 paying that penalty. If people had less than a year left on the penalty, I was urging them to make the interest only payments (or more), and come back to me about three weeks before it expired. Conditions have changed now. In fact, at this update, rates are much better than when I originally wrote this article. For "Jumbo conforming", rates below 5% are very possible, but I don't know how much longer that will be the case

Even if you're only six months into your loan, we'd have to save you about about 1.5% on the rate for you to come out ahead by paying that penalty. $20,000 times 12/6 divided by $547,000 gives a current rate of 7.3%. As you'll see, a blended rate of 6.67 is about as low as I could have gotten for this situation when I originally wrote this. Your rate would have to had to have been at least 8.2% when I originally wrote this for paying that penalty to have been in your best interest.

The loan market today is a very different creature than it was a couple years ago. Let's look at the alternatives, assuming your lender will waive prepayment with a new loan. Even so, let's look at a loan amount of $558,000, which is about where you're going to be with closing costs and one point.

Before I close, it occurs to me to mention that before refinancing, you have to be certain you are actually able to make the new payments. Because the fact is that you owe $547,000 right now, and that's a cold hard fact that nobody is going to change. Quite often, people get put into negative amortization loans because that was the only way they're going to make the payment on that much debt even for a little while. If you cannot realistically make these payments, delaying the inevitable will only cost you more. As things sit, if you sell you might come away with a few thousand dollars if you sold now, and then you can buy something you can really afford. If you wait, things are going to get worse, and you're going to end up with a short payoff and a 1099 love note that says you owe taxes, plus maybe a deficiency judgment, having your credit ruined, and still not having the home of your dreams. This doesn't make me popular right now, but what people like you are going through now is the result of people in my professions who wanted to be rich and popular, rather than actually doing what was best for the clients. Were I in your shoes, I'd likely be asking a lawyer if there's some liability on the part of your lender and real estate agent.

Caveat Emptor

Original article here

Yes, it sounds like a scam to me, too. But it's real.

This isn't to say that there are scammers out there promising the same thing. But there is a legitimate program that accomplishes this. Actually, there are no fewer than six such legitimate programs - three from Fannie Mae, three from Freddie Mac, all sourced in the Help For Homeowners Program. I don't think it's going to help a large number of people, but I'm going to talk about it in order to help the ones it does help separate fact from fiction.

There are technical differences in the programs, governing the relationship of your current loan servicer and the loan originator you apply for the refinance with. But the programs are essentially similar, and use the same rate structure. Which of these three programs you apply for makes no difference to whether a consumer qualifies, or the rate cost tradeoffs offered by a particular mortgage originator. What's that they say about a difference that makes no difference?

It doesn't really matter who you choose to refinance with, or which of the three programs you end up with - the rate structure is the same. So if you do qualify, shop normally for the best loan for you. You don't get any discounts or preferences by going through the same loan servicer you currently have - but the deals that are being offered are very different from originator to originator. Yes, different programs, but same underlying rate structure and your loan ends up being owned by the same people. The only difference is the tradeoff between rate and cost that a given provider offers. In short, if someone offers you a better deal and is willing to stand behind their quotes with something real, there is no rational reason not to do business with them. Ask prospective loan providers all the same questions and see which one is the best.

No matter which of these programs you apply for, they have the following restrictions in common

First, your loan must be currently held by Fannie Mae or Freddie Mac or underwritten to Fannie/Freddie Standards. This means you have to have qualified by their standards originally - these programs will not help or refinance people who got subprime loans! They will ask privacy act questions (Freddie Mac more so than Fannie Mae), so I'm including these links for convenience - use them at your own risk.

Does Fannie Mae Own Your Loan?

Does Freddie Mac Own Your Loan?

Alternatively, you can run a search for the two websites through the search engine of your choice, and find these exact pages through the main webpage of the respective government corporation. They're each one click from the main webpage, although the correct Fannie link is a bit more difficult to spot than the Freddie one.

Second, the original application can have contained no misrepresentations or fraud. This restriction essentially eliminates folks who qualified via stated income procedures. If you could have documented the income to qualify, why didn't you? In every case, it would have gotten you a better rate or a lower cost for that rate. The reason people got stated income loans is that they couldn't.

Third, you must qualify normally for the refinance with one exception. You must qualify on the basis of Debt to Income Ratio, and practically speaking, the automated underwriting program has to accept your loan. The only requirement that has been relaxed is Loan to Value Ratio. This isn't a charity program; it's loss mitigation for Fannie and Freddie. They're not just throwing taxpayer money at a problem - these programs are intended to keep them from losing money by enabling people who would qualify for a new loan if values hadn't receded so much and keeping them in their home rather than going through the foreclosure process and saturating the market and causing still more waves of this. A thoroughly intelligent business alternative for the lenders - much the same reason the lenders finally got serious about loan modification. But individual banks couldn't offer refinancing programs of this nature unless they wanted to become portfolio lenders, which most of them don't and can't. It had to be the underlying investors that offered these programs, something Wall Street is loath to do but Fannie and Freddie can be instructed to do by the federal government.

Fourth, there are potentially issues with loan subordination. Lots of folks got a first mortgage for 80% of the value of their home through Fannie or Freddie, with a balance of up to 20% of the value on the property through a second mortgage. Alternatively, if they did put the full twenty percent down, they got an equity loan in order to take cash out at some later time. If you have a second mortgage and refinance your current first, the second mortgage automatically slides up to first secured position, and your new loan would take second place. That's not acceptable to Fannie or Freddie, and for good reason. So if you do have a second mortgage, the holder of that second mortgage must to agree to subordinate to your new loan in order to be acceptable to Fannie or Freddie. Fannie and Freddie are not allowed to pay off second mortgages under these programs - that's not a risk they have currently taken; they're not going to throw even more money at the program and take more risk. As I said, this isn't charity, this is loss mitigation. Some second mortgage holders may not agree to subordinate. There is nothing that can be done to force them. All you can do is explain why it is in their best interest and hope they see reason. Some second mortgage holders may demand conditions upon their subordination and you must satisfy those conditions to get them to agree to subordinate. One condition that I would expect to get is that the balance on the first mortgage not increase, which means you have to pay closing costs out of pocket if you do have a second mortgage - no rolling them into the balance of your new mortgage.

I need to take a moment here to explicitly state: the 125% maximum loan to value ratio applies to the first mortgage only. It's fine under these programs if there's a second mortgage that sends the comprehensive loan to value ratio (or CLTV) above 125% - so long as the holder of that second mortgage agrees to subordinate.

Finally, there are PMI issues. It isn't necessarily that there is no PMI. What is the case is that Fannie and Freddie will allow your current PMI status to continue. What this means is that if you're not paying PMI currently, your new loan will not have a new PMI requirement imposed. If you are paying PMI currently, the current PMI provider must agree to continue the status quo (mostly they will; insurance companies aren't idiots and they're mostly not constrained by regulations that didn't forsee this situation). For example, let's say your loan was originally funded as a ninety percent loan to value purchase money loan. Such a loan would have had PMI in some form, either regular or lender paid. If your value went up at some point and your PMI requirement was removed due to a loan to value ratio that was below eighty percent, there will be no PMI on your refinanced loan. If your PMI is still in effect, it would need to be carried over from the existing loan to the new loan, but it would not be increased if the current situation was less favorable than the original situation. Normally, if you were now in a ninety-five or one hundred percent or even above 100% loan to value situation (as many people whose values have declined would be), the risk to the PMI provider would increase, and therefore they would charge more money in order to undertake that risk. That is not the case with these special programs. The PMI providers are already on the hook for these losses; again, this is a way that might mean they don't have to lose that money. If they're smart, they will accept the risk of transferring the existing PMI to the new loan. As I said earlier, these are insurance companies, not securitized lenders or investors subject to Federal Reserve and SEC rules. Mostly, they are smart, and therefore willing and able to accept the change. They may impose conditions of their own, like the balance not increasing by more than a certain amount, but mostly they are likely to accept the risk.

Finally, to re-emphasize, if there is currently no PMI on your loan, there will be no PMI required on the new loans under these programs, even though Fannie and Freddie and every other lender in the country would normally require PMI with a first mortgage with over an eighty percent loan to value ratio. The reason why this would normally be so has to do with Federal Reserve regulations - but with the Federal Government basically owning Fannie and Freddie now, and the Federal Reserve having its own reasons for wanting to help clean up this mess, regulations can get modified or exceptions.

One other word of caution: The better your credit score, the better your payment record, the better your loan to value ratio, the better the loan you can expect to receive. Someone with a 780 credit score and an eighty-two percent loan to value ratio can expect a better loan (lower rate/cost tradeoff) than someone with a 620 credit score and a 124% loan to value ratio. Those who have been more responsible will get something better than those who have been less responsible. But these loans do actually stand a decent chance of helping someone who needs it, providing they're in the group that's been targeted by the program

As I said, I don't really expect these programs to help a large percentage of the people in trouble, but even a small percentage of many millions is tens to hundreds of thousands, and I am certainly not opposed to these programs helping those people they can help. These programs are not charity; they have been put into place with a rational, ruthless eye towards Fannie and Freddie not losing money they would otherwise lose if they hadn't undertaken these programs. If they will potentially help you, start contacting loan originators and asking about Fannie and Freddie's 125% loan refinancing programs. Even I'm not certain about all of the various program names (I only care about the ones I can do - but as I said at the beginning of the article, which of these programs you apply for is irrelevant to the consumer - only Fannie and Freddie really care about the differences between their three programs each, because the rate structures are the same, the qualifications are the same, etcetera. Doesn't matter whether you apply through your current loan servicer, another lender, a broker, or a correspondent - shop for the best deal and the best loan for you and your situation). Loan originators will know what you're talking about, and applications are now being accepted for these programs.

Caveat Emptor

Original article here

Disclaimer: Yes, I have been doing these loans under the programs aimed at broker and correspondent originators.

One of the things I hear a lot is that people are getting cash in their pocket from a refinance rate where there is no rebate. "I'm not paying any closing costs!" they proudly tell me, "The bank is putting money in my pocket."

Chances are that's not what's going on. In fact, when the client gives me the chance to investigate, I find out that they are paying huge fees, which are all being added to the balance of the mortgage. But what they remembered was that the lender was also going to give them $1200 or $1500 in cash and add that to the balance on top of everything else.

For "A Paper" loans, Fannie Mae and Freddic Mac define the difference between a cash out and rate/term refinance. On a rate/term refinance, a client can have all costs of the loan covered, both points if any and closing costs. A client can have an impound account set up to pay property taxes and homeowner's insurance out of the proceeds. They can have all due property taxes and insurance paid. The client can have all interest paid for 30 to 60 days. And the client can get up to one percent of the loan amount or $2000, whichever is less, in their pocket. In addition to this, if the old lender had an impound account, the client will receive the contents in about 30 days.

Let's say you have a $270,000 loan on a $300,000 property - small for most parts of California and some other places, but large for most places in the country.

Here in California, yearly property taxes would be about $3600 on that. Insurance is about $1000 per year, monthly interest is $1237.50. I originally wrote this in September, so if you finished your refinance on that day, your first payment would be November 1. You'll make five payments before both halves of your property tax are due, and they want a two month reserve, so 12 months plus 2 months is fourteen months minus five months is nine months reserves they will want in property taxes (Actually, three months reserve plus the first half-year paid through escrow despite the fact you would normally have until December 10th). $3600 divided by twelve times nine months is $2700. Let's say Insurance is due in April, so they'll want eight months of that. $1000 divided by twelve times eight months is $666.67. Plus two points and $4500 in closing costs the lender charges, and they actually may have told you about it, but they emphasized the cash you are getting in your pocket so that is what a lot of people remember.

Even without the cash out, this works out to a new loan amount of $270,000 plus $2700 plus $666.67 plus $1237.50 plus $4500 plus two points which works out to $284,800 as your new balance without a penny in your pocket. If they gave you $1500, your new balance becomes $286,330 (remember the two points apply to the $1500 also!) which will probably be rounded to $286,350. Subtract $270,000, and they have added $16,350 to your mortgage balance but hey, you got to skip a month's payment and got $1500 in your pocket!

As I have said many times, however, money added to your balance tends to stick around a long time, and you are paying interest on it the whole time. Furthermore, lenders and loan originators love this because their compensation is based upon the loan amount. All because you allowed yourself to get distracted by the cash in your pocket. This is fine if it is what you want to do and you go in with your eyes open, but chances are if someone were to tell you "I'm going to add $16350 to your mortgage balance to put $1500 in your pocket and allow you to skip writing a check for one month!" you wouldn't agree to do it. Even if the rate is getting cut so your payment is $75 per month less.

For loans lower down the food chain (A minus, Alt A, subprime and hard money) the lenders set their own guidelines on what is and is not cash out, but Fannie and Freddie's definition is more strict than the vast majority.

So when somebody tells you they are going to put money in your pocket as part of the closing cost, ask them precisely how much is going to be added to your mortgage balance. Print out the list of Questions You Should Ask Prospective Loan Providers, and ask every single one. Because chances are, they are trying to pull a fast one, and once you are signed up, they figure they have you.

Caveat Emptor

Original here

Got a search engine hit for

do I make a big down payment on a home or should make a lump sum payment after the mortgage

Here's the basic rule: You're allowed tax deductibility of the acquisition indebtedness, amortized, plus up to a $100,000 Home Equity Loan. For many years, the universal practice has been to deduct all of the interest on a "cash out" loan even though it's not permitted by a strict reading of the rules. That is now changing, and the IRS has served notice that they are going to be scrutinizing mortgage indebtedness to compare it to acquisition indebtedness, and disallowing anything over what they figure is the amortized amount of purchase indebtedness. For example, if you originally bought your property for $120,000 in 1996, and your original loans totaled $108,000, sixteen years later you might persuade the IRS that your deductible balance is about $85,000, as ten percent loans were common then. But if your property is now worth $500,000 and you've "cashed out" to $400,000, the IRS is likely to prove, well, skeptical of that deduction.

The other reason not to use your down payment money for a down payment is to save it for repairs and upgrades. There's only so many places that the money might possibly come from, and your own pocket heads the list. Cash back from the seller not disclosed to the lender is fraud, and if you do disclose cash back to the lender, you've defeated the only rational purpose for it, because they will treat the purchase price as being the official price less the cash back. You're not legally getting any extra net cash from the seller. Period. If you put the money down and then try to refinance it out, the refinance becomes a "cash out" refinance - the least favorable of the three types of real estate loan. Unless the rates have gone down or your equity situation has improved, you'll get better rates on a purchase money loan, not to mention not spending the second set of closing costs for the refinance because you only did the purchase money loan. Furthermore, at this update, lenders really don't like "cash out" loans - they are coming up with all kinds of obstacles to throw in the way. So if you need the money for repairs or to make the property livable, you're probably going to want to keep it in your checking account rather than using it as a down payment.

On the other hand, the search question postulates that you'll use the money to pay down what you owe, whether immediately at purchase or later on. After you put the money down, you'll have an improved equity situation, which means that you are likely to get a better price on the loan - a better rate-cost trade-off if you put the money down. Not guaranteed, but it is highly likely. A few years ago, 100% financing was generally available. It's not, any more unless you're eligible for a VA Loan, and FHA loans loans go up to 96.5%. For conventional lenders, I've got a couple that will go 95% if the PMI underwriter will accept you. If it's the difference between 95% financing and 94% financing, every lenders I know of treats 94% financing the same as 95%. But if it's the difference between 95% financing and 90% financing (or 95% and 80%, especially), you're likely to get a better loan. Which means you either spent less in costs, got a better rate, or some trade-off of the two. Less money spent equals more money in your pocket, or more money for the down payment, which translates as more equity. Better rate means lowered cost of interest. The fact that it's on less money also means lowered minimum payments, although you shouldn't be shopping loans based upon payment. More importantly, you don't pay interest on money you don't owe. If your balance is $10,000 lower on a 6% loan, that's $600 less interest per year - $50 real savings per month.

If for some reason you want to pay extra, and you're holding on to the money so your minimum payment will be higher, don't. Most loans allow you to pay at least a certain amount extra, and if you're one of those unfortunates with a "first dollar" prepayment penalty, I have to ask, "Why?" There are occasionally reasons to accept a so called "80 percent" pre-payment penalty. There's never a reason to accept a "first dollar" penalty. Not to mention that your lump sum will get hit with the penalty anyway, where if you used it as a down payment, it wouldn't.

If you think rates will go down, that's fine, but I've got to ask "What if they don't?" If they do go down enough to make it worthwhile to refinance, you can always do so. But you should want something you'll be happy with even if they don't.

Finally, I should note that there are arguments against paying off your mortgage faster. Paying extra on your mortgage does sabotage the gain you get from leverage. You could typically take the money and invest elsewhere at a higher rate of return. Psychologically, however, there's a peace of mind to be had from not owing money, or not owing so much money. The only sane way to define wealth is by how long you could live a lifestyle comfortable to you if you stopped working right now, and if you don't owe as much money, that time frame that determines your real wealth is obviously longer. In short, you're better off by the only sane way to measure.

The point is this: There are arguments to be made on both sides, and the circumstances can be altered by the specifics of your situation. My default conclusion remains that if your mind is made up that you're using a certain amount of money to reduce debt on the property, either from necessity or because you want to, then you might as well use it in the form of purchase money down payment.

Caveat Emptor

Original article here