The most differentiating factor between purchase money and refinance money is the legal recourse that the institutional lending agencies have against you. You see when you make the original purchase loan for your piece of real estate your agreeing that if you default that you are not liable. The money is what’s known as non recourse (meaning the bank cannot go after you for the lost portion of the principle.)

The first time you decide to refinance your mortgage to lower your rate, modify the principle amount or performing any type reduction in principle you loose the non recourse clause on your purchase money. Now you enter into a recourse position where you become liable for the debt or the offset in principle when you perform a loan modification.

Even on a short sale if you have refinanced and now you are in a position where you are forced to sell due to financial hardship. You are going to receive a 1099 at the end of the year showing you made a gain. Now you are in a position for a lawsuit, taxable events and a whole slough of financial hardships.

The only way to possibly get out of this scenario is if you are insolvent and you can prove beyond a shadow of a doubt that you cannot repay the debt. Now you’re forced into bankruptcy and you now face more financial hardships than you started with.

On the other hand if you are using a purchase money loan and you are forced into the same scenario of a short sale or loan modification you are not on the hook for the banks loss. I’m not saying that you should never refinance but you need to know why. If you are living on liquid equity squeezing every dime out of your home’s equity then you know you’ve created a financial nightmare.

You have been living in a world where money appeared almost magically especially if you lived in California. Appreciation made equity seem as if it was never ending and then the worst happened. Some savvy marketers created an awesome campaign on adjustable loans that enticed people to buy homes far out of reach, created a frienzy of refinances in the market place.

So now you’ve given up your protection from recourse and you are faced with some huge tax burdens. There are only so many chances for finding a way to pull money out of your home. Now that you have run out of equity, appreciation is gone and you’re under water you’re faced with many choices for help.

The one thing thats failed to be mentioned is the TAX consequence. Be aware of your situation and make your financial choices wisely. Seek out the assistance of qualified professionals for guidance. Your financial house must remain in order no matter what. It’s your life and your future why spend it worried about money and consequence when you can worry about the finer things in life.

Tax consequences don’t go away just by ignoring them, the IRS will garnish your wages and that can have an effect on your over all take home pay, your quality of life and even your employment. You know as well as I that Uncle Sam always get his cut first.

Money isn’t everything, however keeping every sliver of it you can is! Wealth is a concept of it’s not how much you make it’s how much you keep. Know your position and tax consequence before you make a choice that can have a negative effect on your life.

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Yes you can obtain credit in a down market with the proper mindset, motivation, and knowledge. Where do you start especially if you need to acquire it fast and you don’t have many resources. This is a quick guide to preparing for the individual or the corporate credit seeker.

If you want the simple truth you need to be in a tip top shape financially and have the ability without a shadow of a doubt that you are financially able to repay the debt you are borrowing. This is nothing new from previous markets, the new rules are the same when it comes to borrowing.

The new way to obtain credit is to prove that you really don’t need it, however this has been the case since bartering and credit has evolved. People always have said you need credit to get credit and you need money to make money right. It’s no different today.

Guidelines have become tighter and banks and lending institutions started lending less. So with all of these odds against you what do you as a prospective borrower are crucial for your success.

First off you need to have your financial affairs in order, secondly is your credit accurate, have you reviewed it within the last three to six months to ensure that everything on it is accurate? This should always be the first step before applying for any credit.

If you are trying to obtain credit for the first time or after a financial hardship such as bankruptcy or divorce you have some “sub-prime credit card companies” out in the market place who can get you started with a low balance & a higher interest rate.

Now remember these are for reestablishing as well as rebuilding credit. You can always obtain new lower costly credit after six months to a year. Obtaining credit in a down market isn’t as difficult as one might think. The down marketplace makes obtaining credit more challenging and difficult.

However the rules are still the same. Recently I applied for some new credit and I was able to obtain a new line of credit from my credit card company with less than perfect credit. I was able to do this because of the relationship I have established with my current credit card company.

I have also have closed several mortgages which is an indication of banks starting to work through there financial crisis. There is always a way to obtain what you need more than what you really want however people have always seemed to find a way to get what they want rather than what they need.

Now that credit is tighter and banks have cut off a lot of equity lines, credit card companies have folded and new laws on the horizon only time will tell what new requirements will be placed on both businesses and consumers.

Always remember to keep your financial house in order and to keep all of expenditures tracked and allocated. Keep tabs on your credit to ensure your identity is protected. Also optimize your spending so that you can keep enough in reserves to ensure ongoing success with debt elimination.

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