Our Paperwork is wrong: Should we just sign it to close on time?

ID-100126322

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.

-Matt

 

Image courtesy of phanlop88 / FreeDigitalPhotos.net

Landlord won’t provide your payment history? Get creative!

ID-10085769

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!

-Matt

 

Image courtesy of ponsulak / FreeDigitalPhotos.net

Short sale? When can I buy another house?

ID-100240730
Image courtesy of Stuart Miles / FreeDigitalPhotos.net

Over the last several years, especially in the wake of what I like to term as the foreclosure crisis, many homeowners found themselves in a situation where selling their house for less than they owed on the mortgage was the only option.

This is commonly referred to as a short sale and this will show on your credit report. When Julie (name changed) was referred to me from her Realtor, she had been told so many different waiting periods before she could buy that she didn’t know what to believe anymore.  I’ll agree with her, it can be confusing.

The time frame varies between programs, anywhere from no waiting period to 7 years!  Julie was told that she would need to wait 3 years. In her case this was wrong and she moved into her new home less than one year after her short sale.

Here’s why:  FHA, Conventional and VA programs all have different requirements.  Julie was able to take advantage of the FHA program that allows immediate purchase of a new home as long as the mortgage on the prior home that was sold has a payment history that was on time for the prior 12 months.

Here are the programs and their timelines as of today:

Conventional:

  1. 7 years with a down payment <10%
  2. 4 years with 10% down.
  3. 2 years with 20% down.

FHA:

  1. 3 years if the prior mortgage had any late payments.
  2. No wait if the prior mortgage was paid on time and the borrower can show specific hardship reasons for the short sale.

VA:

  1. 2 years in most cases.
  2. No wait if the prior mortgage was paid on time and the borrower can show specific hardship reasons for the short sale.

As always, talk to a professional to ensure that you meet all the guidelines in addition to this general synopsis. That’s what we are here for, to help you understand and walk through each part of this process!

-Matt