Succinctly Put: NO! Now, let me tell you a story:
“Wally” and I are working to refinance a home he bought on Contract for Deed. He and his wife divorced in 2002 and over five years later, he purchased his current home on Contract for Deed (CD). When he signed the CD, it listed him and his wife as a married couple. He asked about it and was told to simply sign it to avoid from having his closing delayed.
If he didn’t sign, he would be stuck trying to find a place to live for 3-4 days as well as juggle scheduling the movers to name a few of the biggest stresses. So, he goes ahead and signs the form as-is and moves in that afternoon.
Flash forward to present and he is finally at a point to officially move this CD into a mortgage in his own name and own the home outright. Here’s the rub: A Contract for Deed is a legally filed and binding document. This means that his ex-wife, is now signed into title as his now current wife, giving her full ownership rights to the new home. HIS EX-WIFE NOW OWNS HALF OF HIS HOUSE!
In an amiable situation like this one, this can be resolved by having her sign a Quit Claim Deed that relinquishes her ownership rights. Fortunately for Wally, She was willing to sign a QCD. If she hadn’t, Wally would have a potential legal battle on his hands and I’m sure the topic of ‘Fraud’ would be brought up as well for knowingly signing a document he knew was not accurate.
Simply put, making moving arrangements or postponing them can be a huge hassle, but if there is something incorrect on your final mortgage documents, you need to take a step back and consider the long term issues that can end up being much more damaging.
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Many potential Home buyers already live in a house, the only difference is that they rent from a Landlord while they prepare for owning a home themselves. In many of these cases, the Lender for a new purchase will require a rental history, so what happens when your landlord refuses to provide it.
This was an issue that ‘Cathy’ was facing when we first spoke. Her husband, four kids and her wanted to move out of their rented home and finally buy a home of their own. Unfortunately, there had been some instances of poor communication and frustrations between her and her landlord. Because of this, he refused to provide a rental history for Lender.
On top of this, Cathy sometimes paid in cash, sometimes paid with checks and paid varying amounts over the course of the month due to income fluctuations.
If she had paid by check: We could get a copy of the cancelled checks to prove her payment history. With cash there are very few options.
My first thought was a personal plea to the Landlord. That went less than ideally. So I had Cathy get me every single check she had sent over the past 2 years along with each bank statement. When reviewing these I noticed a consistent withdrawal on the same day one of her checks were written out. Cathy then mentioned that the cash she paid with was always taken out at an ATM, on the same day each time.
Cathy now owns her new home, having provided the underwriter with her bank statements, check copies and a detailed explanation stating exactly when each payment was made and what source they were made from to prove she was never late on a payment in two full years of renting.
In a very rare situation, listening to the borrowers story can help put the pieces in place to get the evidence needed for a gap like this. Ideally, if you are renting…pay by check! It will make your life much easier when the next step comes and you take the leap to become a homeowner!
Have a great week!
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A while back I had a client walk into the office and ask me this very question. With a business based on referrals, it’s rare we see anyone walk into the office randomly and ask for a pre-approval but that’s exactly what “Nate” did.
You may have heard the term ‘Arms Length Transaction’ which is the term used for buyers and sellers that are not related. This is the most common type of home sale. When someone is buying from a relative, it’s referred to as a non-arms length transaction and Lenders (or banks) each have their own rules regarding what can and cannot be done in regards to financing. If this is the case, make sure you let your Lender know so they can take the appropriate steps and ensure what you will be allowed to do before making any promises. Not all Lenders are created equal, trust your gut.
In Nate’s case, I knew the Lender we were working with would suit his needs. There were several items that needed to be attended to: He didn’t have a down payment for buying the home, he didn’t want to use a Realtor to keep costs down and he wasn’t sure what price his mother would agree to. Okay…
Here’s how we managed these speed bumps: First, we decided that the sales price should be fair to both sides, so we had the appraisal done first and then each of them could decide it they wanted to buy/sell for that value or agree to lower terms. Second, we took that price and determined what Nate would need for a down payment and had his Mother generously give him a ‘Gift of Equity’ which was used in lieu of a down payment. Finally, I referred Nate and his mother to a good friend of mine who happens to be a great Real Estate Lawyer. He drew up the contract for them so we could proceed.
Bottom line: Nate walked into my office with a job and okay credit history with the hope of keeping his childhood home in the family. He walked out a month later with the keys to the home that was now his. Where is his Mother going to live now? I never got a straight answer?? I hope she treated him well as a kid!
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I can’t remember which food chain used the “Have it your way” tagline. However I do think it’s a quick and simple reminder for myself to work with clients the way they prefer to communicate.
An old friend of mine has purchased two homes over the past decade. The second one coming this past year for him, his wife and new daughter as they made the shift from Fargo, ND to the St. Paul area. There’s nothing special or significant about those details. The part that is significant is that in both cases, we never once spoke.
With “Bart’s” job, he spends a lot of time in front of the computer and when he’s done with work for the day, we’re both knee deep in parenting. Something we both place a very high priority on. With the nature of his job and our evening schedules, it made sense for both of us to communicate by email. I do spend a lot of time sending emails to almost all of my clients, but that usually coincides with personal visits or phone calls for a good portion of the process. The emails tend to be a supplemental communication system.
With Bart, not 1 phone call…not one word spoken. We went from start to finish and finally spoke face to face at the closing. It was great to see him again and spend the closing looking through the pictures of his budding family while he signed the final paperwork.
Oh, right. My point. I guess we can stop the rambling and move to that. Some clients live by email, some live by phone, some live by text and in any given scenario, using only one of these is never ideal. The goal is to cater to your client in the best way possible and communicate with them on their terms. When you find the right mix, it’s unforgettable for both you and your client.
With his permission, here’s a quote from our final email before the closing: “Thank you so much on getting me the deal you did. Isn’t trust a wonderful thing? We had just about the whole thing done before even having a phone conversation.”
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