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Don’t Depend On Your Last Pay Statement To Get That Mortgage

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Home Purchase ProcessThe Sixty-Day Seasoning Rule

When you are waiting for approval on your home loan, you need to prepare for this one important detail. Your lender is unlikely to regard your most recent pay deposit as part of your contribution at closing. That means your paycheck is not eligible to form part of your deposit.

Conventional home loans require a substantial deposit of twenty percent of the purchase price. If you intend to take advantage of a government-backed loan program, your deposit may be as low as 3.5 percent instead. However, even if that covers most of your deposit, your lender won’t see it that way.

Instead, mortgage lenders prefer to count only funds that posted to your accounts more than sixty days ago. The term for such balances is that they are seasoned.

To Qualify For A Mortgage Be Prepared

As the Scouts say, “Be prepared” which is an excellent motto for the stressful time that you spend house hunting and negotiating with sellers. Getting to the point of agreement is not the end of the process; as the buyer, both you and the home must qualify for mortgage funding with your lender.

By this point you will be pre-qualified, otherwise, the sellers and agents would not have taken you seriously. You will also have sought pre-approval from a lender. This all serves to put you in the position to negotiate the best deal and close on a house. However, even when you have preapproval, your lender will still have to formally propose the loan to their underwriters, who look at everything very carefully before agreeing to release the loan funds.

Get Your Borrowing Stance On Ahead Of Time

Finding out that your bank balance is somehow inadequate, even when the funds are there, is a jarring experience. Your Realtor will gladly help you prepare your finances for final approval. After all, they depend on your success to stay in business. You still need to begin the process ahead of time. The longer before you intend to purchase that you can start to gather the resources, the more smoothly the home buying experience will go for you.

If you are just now thinking about entering the home buying marketplace be patient, buying a home is a major life event, and you need to take your time to do it right. There is no point in rushing because of two significant risks. You will either regret purchasing the property after you choose it too quickly or you will hit roadblocks. These obstacles are such things as sellers passing over your offer or loan applications rejected by lenders.

In the time you spend to prepare, work to improve your credit score and put away enough funds to make a reasonable offer on a home that you like. If you do this before you begin house hunting, you will have properly seasoned cash in the bank when it is time to close the deal, pick up the keys, and start making payments on your new mortgage.

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Had Enough Of Renting? Maybe It’s Time To Buy Your First Home

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First Time Buyer BasicsSo, you think you’re ready to end your time as a renter and buy your first home. In the long-term, it’s an excellent choice, but when you begin investigating the short-term costs and labor involved it becomes much more complicated.

Buy your first home, and you’ll find that there is work to do to get there and responsibilities that renters never have to consider. The process of purchasing real estate can be stressful, and it takes time and energy.

Steps Into The Home Buying Process

First take a detailed look at your personal finances and check your credit reports. You will need to know your budget and whether you have the funds for a twenty percent deposit. Fortunately, there are FHA-backed loans with 3.5 percent down payments plus costs. You may qualify for even better terms if you are a veteran or serving member of the United States military.

Once you understand your budget and credit, speak to your bank about how to pre-qualify for a home loan. Pre-qualifying marks a milestone in home buying because it shows realtors, lenders, and sellers that you’re serious and, in principle, you have the capacity to purchase a home. From this point, you’re beginning the real journey of finding a home, which warrants a complete post.

The Issues When You Buy Your First Home

You have more payments to make as a homeowner. You have to make your loan payments every month; this usually includes payments toward principal, interest, property tax, and insurance. If you go FHA and make a small down payment, you’ll also pay mortgage insurance premium on the extended loan each month.

The fifth payment type is for homeowner association fees or condo fees. If you are buying into a community or building that has shared responsibilities you pay HOA fees. HOA covers the cost of maintenance, some utilities, and the property management contract. An HOA fee is a given for condos, if you are purchasing a house, you should still budget a similar amount for the cost of maintenance and repairs and set it aside each month.

Do Homeowners Have Lower Living Costs?

The magic of real estate is that every property is unique and that’s also a nuisance if you want to compare your options. Look at how much house you can afford to pay for a monthly mortgage payment for your current rent amount. You should then consider how much it would cost you in down payment and closing costs.

If you can save for a larger down payment and improve your credit score to qualify for lower interest rates on your mortgage the investment will pay off well in the long-term. In five to ten years you will accumulate equity and have a more settled lifestyle. It is expensive to get through the home buying process, and you will have responsibilities as never before, but you will also be a home owner, and that pleasure will make it worth struggling to buy your first home.

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Position Your Offer To Purchase For Home Buying Success

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making-an-offerThe Dance of Offer and Counter-Offer

Any offer to purchase a home begins a process that is both formal and chaotic at the same time. The home buying process goes through stages that are regular and predictable. State regulations, precedents, and contract law govern real estate transactions in the United States.

Real estate buyers and sellers negotiate the prices and terms that suit them, as long as they use the right forms and legal procedures along the way. This back-and-forth exchange of documents between the parties ends either with or without a sale.

The Tools Of Powerful Negotiation

Buyers who have cash and sellers who have patience are more formidable real estate negotiators. Cash offers have the strongest appeal to selling owners because they remove the greatest element of uncertainty in the transaction, which is whether or not the lender will approve the financing for the deal. Mortgages require time for paperwork, which raises the risk of any number of surprises or bank objections that delay or disqualify the transaction.

Sellers who have the time to be patient have the advantage, the resources to create charming, move-in ready show homes. Flexibility in receiving payment, the attention and interest of multiple buyers puts the power in the hands of purchasers, assuming their pricing expectations are realistic.

When sellers are impatient to sell, the negotiating power goes to the savvy buyer. When property owners need to dispense with a piece of real estate they are much more likely to acquiesce to the demands of bargain-hunting buyers.

A Multitude Of Reasons For Counter Offers

Haggling over the price of purchase is not a typical part of daily activities for most consumers. That is why, as a buyer, you look to your real estate agent for the knowledge and experience to make an offer to purchase suit your intention; it might be your best offer or a low-ball offer. What happens next depends on how motivated the sellers are, and whether they have other offers.

The extremes are that the seller will either accept your bid or reject it. Alternatively, if they think they can get a better deal than anything that’s on the table, they may make a counter offer. A counter offer can be for any number of reasons. The most important choice is working with a Realtor; a property professional will organize the sale of your home or find the right one to purchase, often doing both for clients. When you find a property that appeals to you, put in a bid.

Your Options To Respond To A Counter Offer

You can refuse a counter offer and make a counter to their counter offer, but as a buyer, you want to have one thing in mind. You need to be ready with an exact price and terms that work for you. Otherwise, you should either accept or reject the counter offer and get on to the next step. The final step is either to move on to the next prospect or close and pick up your keys.

Your agent will help you all the way through the process; they will advise you and submit all of the forms that go with the negotiations. The flow of offer and counter offer is fast-paced and exciting and usually end quickly once started. If you can anticipate objections and counter offer from sellers, you can be a strong negotiator and your offer to purchase will make the adventure of buying your home a rewarding one.

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Having A Mortgage Payment Emergency – What Do You Do?

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Mortgage Payment Issues?Alarms Will Sound When You Miss A Payment

Financial challenges, such as making mortgage payments every month, are stressful facts of modern life. If it should happen that you find family in the position of being short of the monthly payment, there are things that you can do and some other things not to do.

A Little Caution Up Stream Goes A Long Way

The best time to deal with an emergency situation with your home payments is before there is a problem. If you can proactively start your home loan to be affordable with some enough left over and a contingency plan, then you are less likely to struggle during the repayment period.

A better initial plan for your mortgage might be to buy less home than you can afford. Say, your bank will lend up to $180,000, and you can make a deposit of $45,000, for a purchase price of $225,000. Instead of financing all the way, buy a home that is more affordable. Purchase a $200,000 home, make a $40,000 deposit, keep $5,000 in savings and live with a smaller monthly payment.

Just because a lender will pre-approve you for a higher amount doesn’t mean you have to take the full amount. At least part of the extra savings on your monthly payment should also go into savings as well.

What To Do When The Mortgage Payment Is Due

In the real world, consumers often need to use all of the credit they have to get on the home ownership ladder; they find it is difficult to save for a rainy day. So, what do you do when your mortgage payment is due and the savings is gone? First, don’t attempt to ignore the situation; delaying will only make it worse when you are forced to face up to it.

As soon as you realize, talk to your lender and confess that you will be late with your payment. You are not entirely alone, the government pressures lenders to be fair and there are regulations and rules to support that goal. Because of this, you may be in a position to refinance or modify your loan.

Respond To Challenges Proactively

As soon as you find you will pay miss the payment or make it late, again, contact your lender to discuss a forbearance, modification, or a refinance package. The bank may be helpful or not, but it is in their interest to keep the payments going smoothly; you won’t know their policy until you ask. If you miss a payment without communicating with them, your lender will begin the foreclosure process.

Do some research to learn what resources your state has to help you get through the tight spot. At the same time, start looking to replace the lost income or enhance the cash flow that you have. The sooner you act and the more information you can find, the more likely you will get a positive outcome that carries you through the tough times.

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Buying A Home To Retire In It? Careful How You Do It!

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Retired Mortgage StrategiesBuying a home is an important life choice; buying one to retire in is even more momentous. Where you will choose to spend your retirement years is an important part of the rhythm of life; when your nest is empty, it is time to start thinking about downsizing and preparing to cut loose.

Buying A Home Benefits From Buying Time

In ideal circumstances, retirement is something that requires planning ahead. Buying a home in which to spend your retirement works best if you can start early. Begin the process at leas five years before, or even ten years ahead of the big date, if possible. The earlier you start, the better your situation when it comes to the actual transition.

Buying a new property while you still have another home and using it as an investment property is an excellent strategy. Then once you do decide to move into it use the proceeds of the sale of your previous home for investment income or hold onto it as a rental property.

The Key Performance Indicator For Retirement

The first concern is how you are going to fund your retirement home. If you have investments that you can cash out to pay for a new, more suitable home, that is one thing, however, even with equity in hand, you may decide to finance part or all of the purchase. That means applying for a home loan, and you will still have to qualify for the terms that a bank or other any lender will offer.

Lenders will inspect your debt-to-income ratio very carefully. So, you will do well to apply while you still have a full flow of income. If you have already retired before you apply for a mortgage, your DTI will change to where lenders will only approve smaller loans at higher interest rates.

Budget For Fixing Up The Nest

Of course, not everyone can make such decisions and investments. As a person or couple in need of a new home, how much can you downsize? There are now options that could be as small as a couple of hundred square feet.

These tiny homes make the most of your resources and leave more to invest in annuities or other plans. Another option might be to put all the equity into your retirement home and then take on a reverse mortgage that allows you to use the equity for expense such as healthcare and insurance if you need it later.

Alternatively, you may choose to rent in a seniors community and invest your capital in paying rent and your living expenses. Home ownership can be expensive, with hidden and unexpected costs coming up when you least expect them. Renting will make your costs more consistent every month, as the property management and landlords take responsibility for maintenance and repairs.

Take Action And Find A New Life In Retirement

Owning your retirement home does give you the peace of mind that a landlord cannot sell the property or convert to condominiums against your wishes. Buying a home for retirement also provides a legacy to your heirs if there is equity remaining after your partner and you have passed away. Take action to prepare to retire as far in advance as you are able, The sooner you do, the better your options for buying a home will be.

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Even More Homebuyer Mortgage Tips To Make It Happen

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purchase-homeworkMore Home Loan Hacks For First Time Homebuyers

Homebuyers should shop around for mortgage bargains; not all terms and conditions are the same, but chances are, there’s a mortgage out there that’s right for you. Not all interest rates, closing costs, and terms are the same.

Banks and the other financial institutions that underwrite home loans use diverse business models to decide which investments to make; there is probably a mortgage out there that is just right for you.

Reducing The Costs Of Closing

One unique feature of the U.S. home lending market is the ability for borrowers to pay an interest percentage upfront in return for lower interest payments on the balance of the loan, these are points.

The custom is to pay points to get the lowest rate on monthly payments as the default offer from the lender. If you ask, you can often reduce the points or sometimes pay extra every month to cash out points up front.

Seller Financing

Sometimes people who are selling a home don’t need the money immediately; they would rather have the funds earning interest. The return on a second mortgage will be higher than any savings account or bank CDs.

An example would be where you agree to purchase a home, and you qualify for a conventional loan, but you don’t have the cash for the deposit of twenty percent down. The seller might agree to take back a note for the deposit as a junior loan secured by the property.

Your first lender would have to accept this as a deposit, but banks do agree to such things. Typically, sellers will amortize a junior loan over thirty years but require a balloon payment for the balance in five years, which means smaller payments of principal and an interest rate higher than your first mortgage, and you will have to refinance or sell within the five year period. However, this might get you into a home now and then you can take advantage of rising home values.

FHA And VA For Low Down Payments

For homebuyers of modest means or veterans of the United States military or Coast Guard, there is help with the deposit. Several different government-backed home loan programs make it possible to purchase homes for low interest, low down payments, and low closing costs.

Grants For Buyers

Across the country, there are grants for homebuyers and supplemental funding. Such programs are often created to address issues that communities deem worthy. These programs are diverse sources of grants and subsidized loans that might help based on your situation or the condition of the property. Your agent will be happy to help you find out what is available in the area in which you want to settle.

The Ultimate Homebuyers Hack

As they say, “If there’s a will, there’s a way,” this works for homebuyers as much as any other situation. If you take the time, you will find that there are always better options than the one that the bank offers you initially. Mortgages and buying real estate are complicated issues, talk to your agent about purchasing the right new home for you.

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Back To Basics – What Goes Into A Mortgage Anyway?

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Home Mortgage BasicsOwning your home quite and accomplishment and one to which many people aspire. Most consumers have to do this by taking out a mortgage against the home they purchase. So let’s go back to basics to review what it is that makes a mortgage anyway.

A Mortgage Contract Is A Matter Of Public Record

A mortgage is how most consumers acquire the cash to purchase homes. You secure the mortgage with the property you purchase, you usually repay a combination of interest and principal until the balance is zero. After that, you own the home outright or you can refinance and take the wealth you have accrued. As the borrower, you enter a contract with a bank or finance company that lends you the money. The lender has a right to the title of the home if you do not make your scheduled repayments.

Every state has laws and regulations governing how to deal with this kind of contract. Technically, your home loan is either a mortgage or a non-judicial trust deed certificate with a simplified path to foreclosure. Whether you sign a mortgage or a trust deed depends on your state. The documents for the title to your home and your mortgage are both included in your state’s public record.

These Are The Mortgage Basics

Home Loan Approval – Your lender advances the principal of the loan based on an assessment of your credit reports and the verified value and condition of the property. Your credit history and other factors in the policies of the bank determine the interest rate that you pay. Conventional home loans are either fifteen or thirty-year terms of monthly payments.

Your Equity – The value of the property that is greater than the mortgage is your share. Equity is your deposit and the principal that you pay during the term.

The Deposit – Lenders want at least twenty percent as a deposit or insurance and third party guarantees. Government programs guarantee loans with small deposits; you have to pay an insurance premium on low deposit loans

Escrow and Closing – There will be fees for loan origination and third-party services that confirm the quality of that you either pay when you close on the home or which will add to the balance of your loan. You will purchase title insurance against any claims by previous owners or their heirs.

How it works – The funds go from the lender to the seller via the escrow or title company along with your deposit contribution. You have set payments that pay interest on the balance you owe and a small amount to repaying the principal of

When you start paying a new mortgage the interest takes most of the payment, only a small part contributes to your repayment of principal. As time goes by, your principal accumulates as equity; the interest becomes a smaller fraction, and you repay more principal each month. Toward the end of the term, you are paying mostly principal, and the balance diminishes until there is no more interest to pay and you are done.

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When Is A Reverse Mortgage The Right Choice For You?

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Reverse Mortgage BasicsWhen is a reverse mortgage right for you? The short answer is that reverse mortgages are for seniors. However, you deserve a better answer, and that will take a little explaining. First, there are two categories: FHA Home equity conversion mortgage (HECM) and private company loans.

Since a reverse mortgage pays you instead of the other way around, you need to have sufficient equity in your home to qualify. Additionally, like conventional home lending, reverse mortgages require that the property meets structural requirements.

The HECM Lump Sum Or Annuity

The Federal Housing Administration (FHA) provides the backing for HECM reverse mortgages and reverse annuities and place rules that are much like those of FHA repayment loan requirements. Homeowners over the age of 62 are eligible for HECMs and HUD restrictions apply for property values; these also have the lowest rates of interest for balances. Borrowers don’t have to meet any income threshold.

When is an HECM the right choice? If you need income or access to tax-free funds that don’t compel you to meet income requirements. The payout comes either as a lump sum or an annuity, similar to a home equity line of credit, but without the need to make payments as long as you or your spouse remains in the home.

Private And Jumbo Reverse Mortgages

Privately originated reverse mortgages don’t require that homeowners meet the HUD qualifications for lending. When your home value is greater than the HUD loan limit, you may wish to access oversized “Jumbo” loans. The terms can be more flexible but are often more expensive than an HECM in practice.

When is a private reverse mortgage right? If you have a property that is above the limits for HECMs, you might choose this option, although the interest rate will likely be higher. It may be suitable if you need to pay for long-term care or life insurance.

Use Care And Foresight In Choosing A Reverse Mortgage

There are some risks associated with reverse mortgages, serious hazards that could result in you losing your home right when you are at your most vulnerable. Ask yourself a few hard questions before you commit to a reverse mortgage. Can you find a cheaper alternative? How much will it cost to arrange a reverse mortgage? How will you pay insurance and property taxes? What are your long-term plans?

If you have savings or other investments, they may provide a less expensive alternative. If you have income producing assets such as municipal bonds, you will earn interest and pass them on to future generations as part of your legacy. Reverse mortgages give your assets to Wall Street ultimately.

As with any financial option, there are costs involved in setting them up. The usual title search, appraisal, and other miscellaneous third-party charges apply. There will be an initial mortgage insurance premium and origination fees.

There will be monthly fees that add to the outstanding balance for servicing and insurance. Property taxes are also a consideration and other factors. For example, your ability to maintain the property on a fixed income; if you cannot manage the upkeep, you may risk foreclosure.

If you need funds and can meet the general requirements for a reverse mortgage, make sure to investigate carefully whether it really is the best option available to you. However, if it is the right financing for you, it could be an excellent option that keeps your home a happy one and gives you peace of mind for many years to come.



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Real Estate Disclosures – When Notification Delivers Protection

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Home Purchase ProcessBecause Sellers Should Tell Buyers Certain Things

Sellers have a growing list of disclosures they are required to make to buyers before selling their properties now. However, caveat emptor is still the word of the day when it comes to real estate. Sellers may attempt to cover up defects in a property or misdirect buyers with attention-grabbing furnishings.

Over time, states have created regulations to force sellers to confess a variety of sins, because of the efforts of victims, activists and well-connected buyers who become righteously annoyed. State governments, counties, and cities write the regulations and prescribe the forms of disclosure to prevent acts of deception. Where states force sellers to document defects buyers can be more confident of not having ugly surprises at some later date.

Paperwork By Order Of Your State

Disclosure statements refer to physical property defects or dangers. Alternatively, they can be notifications of some issue within the community or natural hazards. Disclosures can cover anything from criminal activity to radon gas or pollution. Each state has a list of disclosure requirements that accumulated over decades.

Your real estate professional will have all of the information you need as to what applies in your region. State, county and city rules and regulations prescribe the content of disclosures, but agents have boilerplate forms, which come from legal stationers. Like many legal and real estate forms, the structure has to be precise and complete. The National Association of Realtors provides many of the standard documents for the industry, including for disclosures.

Standardized forms reduce the cost and ensure that the parties can comply with the rules correctly. These forms have the relevant standard statements and tick boxes where the seller makes the appropriate indication. Sellers also have requirements to disclose where neighbors, agents and prior owners have informed them about defects that may be present.

Disclosures Differ From Independent Inspections

Third party inspections are not the same as disclosures. As a buyer, you are responsible to get all of the necessary inspections done on your own initiative. If you apply for a mortgage from a bank or other lender, the institution will make it a requirement to show that you have had the inspections by a suitable professional.

Depending on where you are shopping for a home, the seller will present the disclosures, up front or when they have received an offer. It helps the seller to get disclosures done as soon as possible. If buyers are likely to back out, as they have the right to do, it is best to get it over with before the seller has invested too much time and effort.

Extra Effort That Protects Everyone

Disclosure requirements do modify the free market dynamics to some degree. Failure to disclose defects or issues of some king might easily result in litigation or, in extreme cases, prosecution. So sellers rely on their agents for advice and take an abundance of caution to avoid penalties.

Documenting all disclosures on the appropriate forms also protects the seller, they may have to demonstrate their compliance after the fact for any reason. Buyers have to sign off on disclosures too as part of the paperwork that goes with the purchase. So, disclosure statements show for the record that the seller gave proper notification and that protects everyone. Sometimes a bit of additional work during the process makes the outcome better for all involved.

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Vacation Home Or Rental Finance – Choose The Right Loan

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Real Estate Investment BasicsDid You Want A Vacation Home Or An Investment?

If you are in the fortunate position of considering the purchase of property while retaining your home you are doing well. Do you want a vacation home you can enjoy exclusively? Or do you want an investment you can drop in on occasionally? The goal of your expanded real estate holdings will determine which form of vacation home financing is right for you.

Either you want a vacation home, an investment property, or a bit of both. The difference is in how you finance the purchase. With the cash, you will be doubly blessed; the home will be free of lender-imposed restrictions, so you can do whatever you want. A cash buyer has the power to negotiate the best deal from sellers.

However, if you need to leverage your cash equity with a mortgage, you have three options. You will choose from either a second home loan, non-owner occupied loan, or, with a twist, a conventional residential mortgage.

Vacation Home Finance With Second Home Loans

When you purchase a second home, you can finance at the same interest rate as your primary residence. You will have to provide the equity for at least twenty-percent down payment for a loan; there is no option for private mortgage insurance.

You will have to state your full monthly housing cost plus the cost of the second home to qualify for a second home loan. Only you, your friends, and family can occupy this home. Second home loans are restrictive; the note attached to such a loan will have a rider addendum that dictates that you must not rent out the home.

Buying With Finance Like An Investor

Loans for non-owner occupied properties or rental property loans will carry an interest rate that might be more than 0.375 percent higher. Lenders will have varying policies about using rental income in qualifying for the loan.

The advantage of non-owner occupied loans is that you can both rent out the property and use it yourself. Such flexibility means that you can create a rental lease agreement and use the income to cover your costs.

Backing In With A Residential Mortgage

There is a third option. You can finance a second home with a conventional home loan and live in it for one year. If you have been in your first home for more than a year, rent out that home and move into the new one. After one year, you could join an online marketplace like Airbnb to earn income from short-term vacation rentals and use it yourself between bookings.

Funding your vacation home with a second home loan may seem like a way to save some cash by just not telling your lender, but it puts the property at risk along with your credit reputation. Banks are likely to call in your second home loan immediately if they find out that you have tenants. A demand for payment-in-full could come at an awkward time and result in foreclosure if you cannot quickly find the cash to pay it off.

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