5 risky real-estate deals

Despite efforts to crack down on risky lending practices, sketchy housing deals are making a comeback.

1. Hard money lending
On average, these mortgages charge interest of anywhere from 10% to 14% and can require the borrower to pay up to five points, or 5% of the loan, upfront, says Leonard Baron

2. Advances on the First-Time Homebuyer Tax Credit
The First-Time Homebuyer Tax Credit, which offers up to $8,000 to qualifying buyers who purchase a home through Nov. 30, is a generous perk worth taking advantage of. But it can also get some homebuyers into deep trouble.
...depending on the lender, borrowers will have to pay the loan each month, pay a lump sum when they receive their tax credit or make payments

3. Zero-down financing
Recently, more than 10 states, including California, New Jersey and Pennsylvania, created state loan programs that give borrowers the 3.5% down payment they’ll need for an FHA-insured mortgage as a second loan. And in the private lending sector, piggyback loans — when a buyer purchases a home using two mortgages — are slowly returning. In this case, lenders refer borrowers who can’t come up with a down payment to other lenders who can give them a second mortgage for that amount. These second mortgages often carry sky-high interest rates, some near 25%, Babb says

4. Unlicensed lenders failing to properly disclose their identity
Many mortgages brokers who lost their licenses during the real-estate bubble for creating fraudulent documents or failing to disclose fees have returned to the market — and they're underwriting FHA-insured mortgages, Babb says. To become an FHA lender, they just register under different a name — such as their spouse’s.

5. Trying to buy a home that recently changed hands
In an effort to avoid foreclosure, some homeowners are giving ownership to a relative or friend by signing a quit-claim deed — a practice that's permitted in most states
Depending on the type of mortgage they were pre-approved for, prospective buyers may find out late in the process that they are unable to purchase the home and lose the mortgage.

link:
http://realestate.msn.com/article.aspx?cp-documentid=20949374