Posted on: 21st Feb, 2011 11:00 pm
i'm a former loan officer, full disclosure, but pursued another field 4 years back. now that i'm in the process of qualifying, i seem to be a bit confused on how this refinance will pan out. i purchased a home in december 2010. my parents purchased the home outright (i'm a joint account holder on the funds used to purchase the house, if it matters) and put myself and my wife, only, on title. after the purchase was finalized, my parents put a note together for a 600k loan, owed to them and set up as a private mortgage. the house was purchased for $1 mil, so there's a fair amount of equity in there. they basically providede with 400k in help. the 600k loan needs to be refinanced, as a rate and term transaction. in that manner, they get back their 600k portion from the lender who ends up givng us our new loan and pays them off. the house needs some work and we decided we'd finalize the refi, before doing all the work. the issue if one at all, is that we haven't moved in to the propert yet. we currently reside in an apartment complex, that happens to be owned by my parents as well. our hope is to move into the house, once all the rennovations are done. no reason to get all our new furniture dirty and live uncomfortably, when we can sit tight where we are, a mere 5 minutes away from our new home.
the problem i think i may encounter is owner occupancy. technically, we are not living in the subject property. i do, however, have utility bills written out to our name, 1st and 2nd month mortgage payment cancelled checks, written out to parents, and there are obviously no other mortgages on our credit report, as we are living in this apartment nearby. i legitimately intend to occupy this place. we just want to get the loan done and take advantage of low rates, as they seem to be inching up. if there were a downtrend, i wouldn't worry, and we could have started construction back in december, when we originally purchased the home. then we could have moved in and refied as owner occupied, with no issues.
my loan scenario is very clean. full doc, 785 credit score, 60% ltv,
at least 12 months in seasoned reserves, etc...my broker tells me though, that i may need to make it look like i'm actaully living in the property right now. that would require me to put up a fair amount of furniture just for the appraisal to show owner occ. otherwise, it will look vacant. to make it even worse, i'd have to move all that furniture out right after closing, to begin work. it's a unique situation and i'm not sure if anyone has come across something like this. i was basically wondering if i can just write a letter of explanation to the lender indicating my intention to move in, as i'm "techincally" not living there? also, i haven't thought this far out, but will i run into any issues with having a private loan (we have an offical note and everything in place) with my parents? refinancing within 2 months of purchase, but rate and term only, no cash out.
any feedback would be greatly appreciated. thanks in advance!
the problem i think i may encounter is owner occupancy. technically, we are not living in the subject property. i do, however, have utility bills written out to our name, 1st and 2nd month mortgage payment cancelled checks, written out to parents, and there are obviously no other mortgages on our credit report, as we are living in this apartment nearby. i legitimately intend to occupy this place. we just want to get the loan done and take advantage of low rates, as they seem to be inching up. if there were a downtrend, i wouldn't worry, and we could have started construction back in december, when we originally purchased the home. then we could have moved in and refied as owner occupied, with no issues.
my loan scenario is very clean. full doc, 785 credit score, 60% ltv,
at least 12 months in seasoned reserves, etc...my broker tells me though, that i may need to make it look like i'm actaully living in the property right now. that would require me to put up a fair amount of furniture just for the appraisal to show owner occ. otherwise, it will look vacant. to make it even worse, i'd have to move all that furniture out right after closing, to begin work. it's a unique situation and i'm not sure if anyone has come across something like this. i was basically wondering if i can just write a letter of explanation to the lender indicating my intention to move in, as i'm "techincally" not living there? also, i haven't thought this far out, but will i run into any issues with having a private loan (we have an offical note and everything in place) with my parents? refinancing within 2 months of purchase, but rate and term only, no cash out.
any feedback would be greatly appreciated. thanks in advance!
Hi john,
I haven't come across such a situation before. Owner occupancy is major criteria which one needs to fulfil in order to get a mortgage. As your broker has said, you should make the property look as if it is owner occupied. Unless it is owner occupied, you may not be able to refinance the loan. I don't think private loan will be an issue in case of refinancing the loan.
Thanks,
Jerry
I haven't come across such a situation before. Owner occupancy is major criteria which one needs to fulfil in order to get a mortgage. As your broker has said, you should make the property look as if it is owner occupied. Unless it is owner occupied, you may not be able to refinance the loan. I don't think private loan will be an issue in case of refinancing the loan.
Thanks,
Jerry
As long as you intend to move in, and no one else lives there, you probably satisfy that criteria. Check with the mortgage company.
I'm planning to visit Amsterdam, Netherlands next week. I would like to know whether the Marriot Hotel (located between Leidseplein and Vondelpark) or the Renaissance Hotel (located between Central Station and Dam Square) would be more convenient given the winter weather.
Which hotel location is better for tourist to see the major attractions in the wintertime? Any other travel tips for exploring Amsterdam in December? Thank you.
Which hotel location is better for tourist to see the major attractions in the wintertime? Any other travel tips for exploring Amsterdam in December? Thank you.
Parents put together a NOTE.
Is there a recorded MORTGAGE.
A NOTE is evidence of a loan and the repayment terms. That does not make it a mortgage.
Best bet would seem to me to be a portfolio loan that has no seasoning requirements for title or for cash out. Such a loan depends on what state the property is in and what portfolio lenders may lend in that area.
Is there a recorded MORTGAGE.
A NOTE is evidence of a loan and the repayment terms. That does not make it a mortgage.
Best bet would seem to me to be a portfolio loan that has no seasoning requirements for title or for cash out. Such a loan depends on what state the property is in and what portfolio lenders may lend in that area.
Thank you for the correction. It is in fact a note and not a mortgage. Will the fact that it's a note and not a mortgage make the transaction simpler? How does the lender view the payoff of the note?
Hi john!
Welcome to forums!
You should pay back the mortgage as per the terms and conditions mentioned in the note and the mortgage docs.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
You should pay back the mortgage as per the terms and conditions mentioned in the note and the mortgage docs.
Feel free to ask if you've further queries.
Sussane
Since there is no mortgage on the property, any refinance you do is a cash out refinance.
I have no idea where the property is located. There are about 72 counties in the United States in which the Agencies (Fannie Mae and Freddie Mac) are permitted to do mortgages on single family homes over $417,000 and can go up to $729,750 until September, 2011 and after that up to $625,500 in those counties. Not the best deal in the world. They charge 1.00 points just for cash out so rate is higher than would be for purchase or rate and term refinance. Also, can not do a cash out refinance for at least six months.
No idea what they regard a Note as. May not even be necessary to tell them there is a Note. You bought for cash and now you want some of your money back.
If you are not in one of the 72 High Cost Counties, and, even if you are, a jumbo loan other thah an Agency loan may be best rate and maybe can be done now. There are pockets of portfolio lenders in various parts of the United States and I would not know them all. I only know I could do a portfolio loan, cash out refinance, any time the day after you pay cash for the purchase, in NJ and CT and 11 ocunites in NY and 9 counties in PA.
Anyplace else, some else would have to help you.
I have no idea where the property is located. There are about 72 counties in the United States in which the Agencies (Fannie Mae and Freddie Mac) are permitted to do mortgages on single family homes over $417,000 and can go up to $729,750 until September, 2011 and after that up to $625,500 in those counties. Not the best deal in the world. They charge 1.00 points just for cash out so rate is higher than would be for purchase or rate and term refinance. Also, can not do a cash out refinance for at least six months.
No idea what they regard a Note as. May not even be necessary to tell them there is a Note. You bought for cash and now you want some of your money back.
If you are not in one of the 72 High Cost Counties, and, even if you are, a jumbo loan other thah an Agency loan may be best rate and maybe can be done now. There are pockets of portfolio lenders in various parts of the United States and I would not know them all. I only know I could do a portfolio loan, cash out refinance, any time the day after you pay cash for the purchase, in NJ and CT and 11 ocunites in NY and 9 counties in PA.
Anyplace else, some else would have to help you.
John V.,
Sorry for the back and forth. I appreciate all your feedback, but I'm still a bit confused. I have a note, secured by a deed of trust. The note shows a loan (parents are the lender) in the amount of $600,000. The $600k is due in 5 years and has terms of 5% Interest Only. The home is located in the Brentwood area of Los Angeles, and is valued at $1,000,000. I can easily go full doc, 60%LTV, 786 credit score, meet reserve requirements for 12 months minimum, etc ...
All I'm looking to do is payoff this loan for the exact amount, no excess cash. I don't understand why this is considered a cash out refinance. I'm just paying off an existing loan.
And yes, the property was purchased in cash, but a loan was created after the fact, payable to parents. There is a balance owed on this property and it's on paper. I don't have 100% equity...I would understand if I didn't owe anything and then asked for 600k in cash to my pocket. In my scenario, I'm paying off an existing $600k loan amount and nothing is coming to my pocket.
Does this clarify things? Am I still missing something. Thanks for your thorough feedback!
Sorry for the back and forth. I appreciate all your feedback, but I'm still a bit confused. I have a note, secured by a deed of trust. The note shows a loan (parents are the lender) in the amount of $600,000. The $600k is due in 5 years and has terms of 5% Interest Only. The home is located in the Brentwood area of Los Angeles, and is valued at $1,000,000. I can easily go full doc, 60%LTV, 786 credit score, meet reserve requirements for 12 months minimum, etc ...
All I'm looking to do is payoff this loan for the exact amount, no excess cash. I don't understand why this is considered a cash out refinance. I'm just paying off an existing loan.
And yes, the property was purchased in cash, but a loan was created after the fact, payable to parents. There is a balance owed on this property and it's on paper. I don't have 100% equity...I would understand if I didn't owe anything and then asked for 600k in cash to my pocket. In my scenario, I'm paying off an existing $600k loan amount and nothing is coming to my pocket.
Does this clarify things? Am I still missing something. Thanks for your thorough feedback!
When a NOTE is secured by a deed of trust, the Mortgage is recorded to show there is a mortgage on the property, a lien on the property as collateral for the Note.
The Mortgage is the Security Instrument.
I do not know California laws and I would not want to steer you wrong. Whenever I correspond with anyyone outside of NJ, NY, PA and CT, the four states in which I am licensed, I refer them to the most knowledgeable, professional mortgage person I have ever met----and I never met him in person. I only read what he writes on another mortgage broker site.
He is licensed in 49 states and just happens to be in California. I suggest you contact him:
Shane Milne
shane@thebesthomeloans.com
Cell: 949-322-03616
The Mortgage is the Security Instrument.
I do not know California laws and I would not want to steer you wrong. Whenever I correspond with anyyone outside of NJ, NY, PA and CT, the four states in which I am licensed, I refer them to the most knowledgeable, professional mortgage person I have ever met----and I never met him in person. I only read what he writes on another mortgage broker site.
He is licensed in 49 states and just happens to be in California. I suggest you contact him:
Shane Milne
shane@thebesthomeloans.com
Cell: 949-322-03616
The occupancy is going to be an issue, however, you maybe able to purchase the home as a buyer maybe. Just a thought.
Kym,
The home has already been purchased in cash. Subsequenlty, we took out a private mortgage, payable to my parents, who helped with the initial purchase. I haven't moved in to the house yet, as we'd like to remodel the place. I plan on refinancing and then moving in, but obviously the place is unfurnished, hence, the occupancy issue.
The home has already been purchased in cash. Subsequenlty, we took out a private mortgage, payable to my parents, who helped with the initial purchase. I haven't moved in to the house yet, as we'd like to remodel the place. I plan on refinancing and then moving in, but obviously the place is unfurnished, hence, the occupancy issue.