The Mortgage House - Home Loans

Protecting Your Interests

Question:
“My husband and I were chosen to purchase a brand new condo below market rate. In order to get a mortgage my husband needs to put it only in his name because of my credit, but the developer will not allow me on the deed if I'm not on mortgage. The down payment and closing costs are being paid mostly by me. How can I be entitled to the equity if for some horrible reason my marriage ends in the future?” E., New York, NY

Answer:
Good question, very good concerns! Get yourself to a reliable attorney and have a legal contract drawn up, outside of the purchase proceedings, to protect your interests. Have it cover any and all agreements between you at this time and try to encircle any future events that might occur. I always recommend this to any partners buying or refinancing when all are not named on title or on the debt. Based on the hundreds of letters I get, it can be a very wise move. Good luck.

Copyright © 2011 Roxanne Carr
This article is a forum to explore real estate principles. It is not intended to provide tax, legal, insurance or investment advice and should not be relied upon for any of these purposes.
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Mortgage Matters After Divorce

Question:
“I was recently divorced and my ex-husband was able to refinance the primary mortgage in his name only but the HELOC was resubordinated and I am still listed as a cosigner. He is making the payments on the HELOC. My question is regarding what kind of lawyer or advisor I would need to seek in order to pull together a legal document that protects my interests as much as I can. I know that the only way to remove the HELOC from my credit is to have him refinance, or to sell the house (and have the sale cover the cost of both). In the interim, however, I'd like to protect my rights to the house in the event he should die (I hope not) or simply not be able to make payments on the home (in which case, I want to draw up that the next steps on the home would be by my discretion). Is this a real estate lawyer? My ex and I are amicable - is this something we can write up on our own? I am simply trying to be sure I am covering all of the bases. Everything I Google just doesn't seem to speak to this specific issue. Your answers get really close to it so this website is amazingly helpful. Let me know your thoughts.” S., Highlands Ranch, CO

Answer:
You are very alert to consider this action, very appropriate for your situation and one I recommend highly. Find a good real estate lawyer in your area, and he or she should be able to help with an appropriate contract to protect your interests in any event. First I would suggest you contact the lender on the home equity line of credit; it never hurts to ask to be removed from liability, even though it is rarely granted. You are fortunate to have an amicable relationship. Good luck.

Copyright © 2011 Roxanne Carr
This article is a forum to explore real estate principles. It is not intended to provide tax, legal, insurance or investment advice and should not be relied upon for any of these purposes.
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Wrangling with Credit

Question:
“My wife just repaired her credit, and well my credit is lousy. I plan to file chapter 7 in a few months. A year from the date of discharge from my BK, can I be a cosigner with the lender using her credit and her income, and they also use my income as a secondary to determine the loan amount and rate?” E., Visalia, CA

Answer:
No, usually a year would not be enough time to have passed after a Bankruptcy. A Bankruptcy of any kind is a very serious matter and quite often indicates that a person was not able to handle his or her debts. Of course, this is generally viewed by lenders as a very detrimental aspect in someone’s credit history. I say generally because there can be exceptions, such as severe medical situations or extreme, unavoidable circumstances.

Each loan program is a little different, and each lender also, but usually the bare minimum is two years and more often four at least. Your credit, her credit, everyone's income and credit would be evaluated together, whomever is making the mortgage application. There would be no secondary income; everyone is treated the same. Income is combined for purposes of qualifying for a mortgage; yet each person is equally responsible for making the payments.

Credit is critical, even more so now because of the disastrous events of the last few years. I don’t know why your credit is “lousy” or why you are filing a Ch 7 Bankruptcy, but it seems like home ownership should go to the bottom of your list for the time being, especially since your wife has just “repaired” her credit. I would say your primary objective should be trying to get out of debt and then keeping any credit spotless; worry about buying a house when the timing is right, and you have both learned to live within your means. Good luck.

Copyright © 2011 Roxanne Carr
This article is a forum to explore real estate principles. It is not intended to provide tax, legal, insurance or investment advice and should not be relied upon for any of these purposes.
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Only 5 Years Left – Nice Problem

Question:
“My wife and I are considering a divorce. We only owe 5 more years on our house. We have agreed that if either one of us wants to keep the house the other is ok with that without buying each other out. Is there any way to have one name removed from deed and mortgage, without refinancing? I hate to have to push loan to 15 years if I don't have to. Please Advise. Thanks.” R., Parma, OH

Answer:
Congratulations on having only five years left on your mortgage and a “well done” for your amicable divorce.

With regard to your existing mortgage, the answer would depend on your lender and the type of your loan, but rarely can a person be removed from a mortgage debt without a refinance, though changing title is easy. Most mortgages are bundled into securities and sold on Wall Street, therefore original terms are not easily altered. If you happen to have used a lender that kept your loan in-house, in its portfolio, there may be a chance; or if your loan has an assumption/modification clause. Contact your lender’s servicing personnel and find out their procedures in this regard.

If you have a standard conventional loan, with most lenders you can refinance in any five-year increment (5-10-15-20-25-30) as long as you qualify, so you do not need to go all the way to 15 and start over. It is just that an interest rate break occurs at the 15-year level. Also, remember that even if you get a 15-year loan, you can pay it following a five-year amortization schedule if you have no prepayment penalty. Good luck.

Copyright © 2011 Roxanne Carr
This article is a forum to explore real estate principles. It is not intended to provide tax, legal, insurance or investment advice and should not be relied upon for any of these purposes.
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Bad Legal Advice in a Divorce?

Question:
“I've gathered a lot of information from your posted FAQs-my question deals with much the same background. My ex-husband and I were final in May, and as part of that agreement, he had to refinance or sell the property in 60 days. Well, the property consists of two lots, one with the house on it and one that wasn't buildable until the sewer line was put through last year (it wouldn't perk) as the backyard. I was required to Quit Claim the property to him so he could refinance, which I did.”

“He didn't refinance and has listed the house but not the adjoining lot. He Quit Claimed the adjoining lot that is in the mortgage to his girlfriend. Can he separate the parcels out if they are covered under one mortgage? He has filed a form with the mortgage company that specifically excludes me from speaking to them at all even though I am on the mortgage as the co-borrower. Is this a permissible action or does the liability have to be satisfied before the properties can be separated for disposal?” A., Talbott, TN

Answer:
It sounds like you need to talk firmly with your divorce attorney. No, you cannot split off one of two properties covered by one mortgage without the lender's approval. The lender will generally ask for an appraisal and a paydown of the loan amount for the value of what is to be split off. It is called a Partial Reconveyance.

You should be able to talk to the lender if you are still a borrower of record; possibly you are not. Check title with your local County Recorder. There is no form I know of that would preclude you from speaking with them if you are truly a borrower, and it is to their advantage to help you in any way possible. Ask for a supervisor. Good luck.

Copyright © 2011 Roxanne Carr
This article is a forum to explore real estate principles. It is not intended to provide tax, legal, insurance or investment advice and should not be relied upon for any of these purposes.
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Not Enough Gratitude

Question:
“My son is 21, wanted to buy a house but didn't have enough credit history, not bad credit. We found a foreclosed house where he is going to school and offered to buy it for cash because there were multiple offers. We had some money invested and $80,000 in our bank account because we’re building a new home. So we bought this house for $130,000, and the deal was we would charge him 5% interest and treat this like a loan.”

“ So now he and his fiancé are questioning if most parents charge interest in a case like this and if they got an FHA loan their interest would have only been 3.75%, kind of putting us on a guilt trip. I think her parents have some part in this. We had to take out a home equity loan at 4.4% since we don't have the big chunk of available cash to finish our home. Our invested money was $300,000 in municipal bonds, yielding about 5-6% and we took $50,000 out of those. We did this to help them but also we are not wanting to lose money, and if we don't charge them interest that would be the case. What do you think?” G., Ronald, WA

Answer:
I think the other parents, your son and his fiancée should be grateful, and you should be thanked profusely for what you have done! It is highly unlikely they would have gotten the property without you or other cosignors or family to extend the dollars, and you really could have charged a lot more. Sorry, but I think it is extremely unappreciative of them and presumptuous they should even question your rate of return unless it was extremely high. You deserve at least more than you would have received in a money market or stock fund.

Surely they could see this logic. Additionally, the FHA rate scenario is highly unlikely plus it would have additional costs and consequences not incurred with your loan. Good luck.

Copyright © 2011 Roxanne Carr
This article is a forum to explore real estate principles. It is not intended to provide tax, legal, insurance or investment advice and should not be relied upon for any of these purposes.
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Huge Cosigning Problem

Question:
“Back in ‘92 my parents asked me to add my name for my brother’s home purchase. I did so to help the family; I have never lived at his home, made payments, or used it for tax purposes. In 2002 my brother asked me to do a quit-claim and remove myself from the deed, so I did since I have never had any interest in the home. Well, recently my wife and I tried buying a home - we both had great credit in the 720’s, make good income, never been late on any payments. All was good until we got denied for the loan because it turns out my brother has been late every month on his mortgage for the past 30 months.... Obviously this reflects bad on me and now he can barely afford to make the payments every month and refuses to sell the house to get me off the loan. He can’t refinance because he has bad credit and does not have a lot of income since he has to pay spouse & child support and unemployment withholds his wages and I.R.S. My question is do I have any rights; can I get myself off this loan since its affecting my chances of ever buying a home. Can I put myself back on the deed and sell the house to get myself off the loan. Or can a family member try and refinance the home for him to get me off the loan!! I am stuck what can I do?” R., Temecula, CA

Answer:
Yes, sorry, this is the huge problem with cosigning. It is such a shame you were not notified of the late payments so that you might have had a chance to step in at an early stage. A cosignor, of which you are now aware, has the same responsibility for paying the loan as the primary mortgagor. Of course a loan servicer should have alerted you.

He can put you back on title, for sure, and you can try to bring the loan current. You cannot sell a house to yourself, sorry. You can refinance to get someone else off, but the very poor payment record will stay with you for seven years and would facilitate a certain rejection for either of you.

Can someone else refinance in their name and get you both off? Well, not unless they have been on title for at least six months. A family member, if they so choose, could step in and buy the house, or course, and get their own mortgage. What a mess. Good luck.

Copyright © 2011 Roxanne Carr
This article is a forum to explore real estate principles. It is not intended to provide tax, legal, insurance or investment advice and should not be relied upon for any of these purposes.
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Saving for a First Home

Question:
“My husband and I are wanting to apply for a mortgage. We decided to wait one more year, possibly 2, to grow our savings as we have none right now. We are looking to save $15,000 each year. We have an installment loan for our vehicle at $33,000. Our fico scores aren't too shabby - My husband's is 709, mine 689. My question is would it be better to put our savings toward paying off our car since that would open up another $620/month, or put it as a down payment on the house? We will likely be doing a VA loan so we won't have to worry about PMI. My husband makes 55k/year; I have no income as I am a stay-at-home mom to our 4 children. We are looking at houses in the 200k range. Is this reasonable? Also, my husband filed for bankruptcy 3 years ago...will this negatively affect our mortgage loan request? Thank you so much for your help!” A., Lisle, IL

Answer:
The circumstances sound reasonable for you to qualify, and he has passed the minimum two-year VA requirement for aging of a Bankruptcy (and hopefully has re-established good credit). It will still depend on the lender you select. VA only guarantees the loan; the lender can make their own rules for qualifying.

Your scores are good, and generally a VA loan does not require a down payment. Therefore, I would suggest using the savings to pay off the car. That will put you in a good place to begin your new venture. You made a very smart move by deciding to wait and save for the big event. Be sure and maintain records of your savings and your car payoff to show that you have the ability to put aside money from earnings. Good luck.

Question:
“My ex and I have been divorced for 5 years now. She was court ordered to obtain a new mortgage within one year’s time. I was ordered to do a quit claim deed. She has made the payment on time every month but has failed to refinance 5 years past now. I now want to obtain a mortgage to buy my own home. Will I have a problem? The title search I am told will come up with my name on it. I filed chapter 7 Bankruptcy almost two years ago against the loan. So I have no financial obligation. Is there any way I can get my name off the title other than her refinancing?” M., Indianapolis, IN

Answer:
I hate to say it, but this is really a very common problem. Many, many of the inquiries I get are about ex-spouses not refinancing because they cannot qualify, the house has lost too much value, or because they are just in a mean mode after the divorce is final. It does not help you now, but I would always recommend these matters be concluded before the final decree.

As far as your situation is concerned, I will presume you have already asked your lender of record whether you can come off the mortgage (the Bk does not take you off the mortgage). This is extremely rare because nearly all mortgages are traded in the secondary market and cannot be changed without refinancing.

Yes, you may encounter problems when you seek other financing unless you are extremely well qualified. This loan will show up as a liability and most lenders will count it against you. You can show proof of the divorce settlement agreement and provide documents that show your ex-spouse has been paying as agreed for at least 12 months, but that doesn’t work with all programs.

The Chapter 7 Bankruptcy will not help either since it has not even been two years. Each program is a little different, but most lenders require much more time to have passed since that action, and they will all want to see that you have re-established and maintained a good credit history since then. Good luck.

Question:
“My husband and I want to buy a house. Our score is 566. Could we get a loan with a cosigner that has perfect credit?” S., Columbia, SC

Answer:
You know, it is nearly impossible to answer this well without substantially more information. Let me ask YOU: First, why such a low score? What is keeping it at that very low level? Are you really ready to buy a house? Have you considered all the additional expenses and responsibilities that come with owning a home? Are you saving money for a down payment? Have you been paying rent that might be similar or more than a mortgage payment and still putting some savings away?

Having a cosignor with perfect credit can help you qualify for a loan, but credit scores are critical. Yours will be considered as much as your cosignor’s. And most investors, even with FHA-insured loan programs, now look for a minimum of 620. FHA has the lowest requirements for FICO scores, but some lenders increase them to minimize their risk, especially after the turmoil of the last few years.

Few factors affect the mortgage lending process as much as a borrower's credits score, and very often rightly so. If you have quite a bit of credit card debt and are carrying balances that may be over 30 to 50% of the maximum you are allowed, you are viewed as living beyond your means, using credit as a crutch. If you have 30-day lates on installment debt or mortgage debt, be ready for a dive in your scores. Lenders don’t really want to make a new loan to someone who can’t handle what they have.

Add to this any judgments or collections, and your score really can be affected adversely. Many people think that letting a small medical bill go to collection while they wait for their insurance to pay is not a big deal – but it is if you want to keep a reasonably good credit score.

There are many factors to a credit score, but for you particularly, I would suggest you work on your current debt situation before moving on. Show yourself that you can manage debt before you incur more, substantially more with a mortgage. Credit scores can improve very rapidly with the proper concentration. Good luck.

Copyright © 2011 Roxanne Carr
This article is a forum to explore real estate principles. It is not intended to provide tax, legal, insurance or investment advice and should not be relied upon for any of these purposes.
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Renting Home Out with an FHA Mortgage?

Question:
“I purchased my first home two years ago, using an FHA loan. Since then, my boyfriend has moved in and we need more space! I cannot sell my current home as I am $40,000 upside down. How do I rent it out if FHA requires it to be owner occupied? Thank you kindly.” J., Surprise, AZ

Answer:
If you have a standard FHA loan (not a special FHA financing loan for first-time homebuyers requiring lengthy owner-occupancy) and you have occupied it as your principal residence for two years, that would be sufficient for abiding by the rules.

It is always the “intent” that is important; circumstances do change, and most loan programs recognize that.

You won’t be able to get another FHA loan at this time because of the “upside down” situation, but you may find a conventional loan that will work for you. Usually you are allowed to apply for a second FHA loan if your move is predicated on family size or a job situation, but the existing one needs generally to have a 75% loan-to-value.

I am pleased to hear that you are sticking with it, though, and not walking away from your legal obligation because of the inverse loan-to-value situation. Good for you. If you do purchase with your boyfriend, please be sure and have a legal contact drawn up that sets forth all of the understandings and responsibilities between you. Good luck.

Question:
“I'm going to be attending veterinary school in Manhattan, KS in the fall. My mom thinks that it would be a good idea for her to buy a house for me while I'm there, selling it when I graduate. The idea is to buy a house with another unit that is income producing, and I would use that to pay the mortgage and utilities and use my loan money for any other expenses. There are many of these properties available for 100k to 140k in this college town. My husband (a graduate student on a 16k stipend) is uncomfortable with my parents buying for us because he doesn't want us to be babied (this year we're 28 and 29), so I was thinking that we could "co-buy" it with my parents, so that we are shouldering more of the responsibility and gain some more credit in the process. My parents have perfect credit (pretty much 850, about 500k or more income from dental clinic and nursing job), and my husband and I are both at about 760 or more, no bad marks, just "young credit." We have about 60k in college loans combined, but I do have a work history from the past two years. I know that we won’t qualify for a loan on our own, but I wonder if we could qualify for an FHA 3% loan, or something like that with my parents as cosigners. My mom might even just pay the 20% (to avoid PMI) and I will pay her back on my own at the same time I pay the mortgage. Thanks so much for this website. I've learned so much already, and I hope that you can give me some guidance!” S., Houston, TX

Answer:
Thank you for such a well thought-out letter. Yes, you can "co-buy" with them, even without a current job for most FHA financing; and the down payment is now a minimum 3.5%. The 20% to keep away from PMI only applies to Conventional financing; FHA loans have MMI (mutual mortgage insurance in the monthly payment), which may be minimized or eliminated with a shorter term and/or a larger down payment.

Your parents just need to be sure this is what they want to do, and you ALL need to have a legal contract that sets forth your understandings for present and possible future events between you. Draft up everything you can think of now and seek legal assistance before you proceed. Good luck.

Copyright © 2011 Roxanne Carr
This article is a forum to explore real estate principles. It is not intended to provide tax, legal, insurance or investment advice and should not be relied upon for any of these purposes.
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Ready to Buy But Low Scores

Question:
“My fiancé and I are very interested in buying a home. I only work part-time, make around 16k a year, but I have been employed at the same company for over two years and have a credit score of 730-750. He makes significantly more money at around 38k a year, but his credit is terrible (400 or so) due to a number of mistakes he made years ago. He has a perfect rental history, and paid off his car loan without ever making a single late payment. What are the chances of us being able to get a mortgage, and would cosigning help?” H., Port Angeles, WA

Answer:
It will depend on so many things. Foremost to me, why are his scores still so low if he has been doing well with credit lately? Credit scores can change very rapidly unless there is something left outstanding for a long time. Medical collections come to mind. People often consider them minor and maybe not accurate because of insurance coverage, but they can be very detrimental to credit scoring and should be handled immediately.

Before you proceed any further, I would suggest you find a good local mortgage advisor and have his credit scores evaluated (and both your qualifications too as to income and debt). He could possibly ask for a "rapid rescore," a method that shows what can be done right away to significantly improve a credit score. A cosignor can help, but everyone will be evaluated, and you should attend to both of your credits before going forward. Remember, there are a lot of things to consider in order to decide whether you are ready to buy a home and make that huge commitment. Often it is better to wait and be sure you can be comfortable in all respects. Good luck.

Question:
“My husband co-owns a condo with his brother and sister-in-law. They have two loans out, one bigger and one smaller. They are trying to pay off the smaller one to refinance this summer. The condo was bought for 375k, they owe about 300k, and it is now worth about 125k. My husband and I want to get our own home, but in order to do that we need to get off of the mortgage/loans on the condo. How can we do this? (Keeping in mind the brother and sister-in-law cannot afford to buy us out, and if we refinance on their credit, they have bad credit scores and a lot of debt.) Any suggestions?” J., Napa, CA

Answer:
Being this far upside down, I can't see how your relatives would be able to refinance. There has to be enough equity (difference between value and loans) to encourage a lender to make a new loan. Plus, you add their bad credit scores and debt, and your husband carries all the weight along with the damage to his credit.

This co-ownership will keep the mortgage(s) showing as a liability in your husband’s credit. He did agree when he became a coborrower to pay the debt if the borrower could not. You and he will now have to suffer the consequences; each mortgagor is as responsible for the debt as the other. You may have to wait quite a while for that home of your own unless you can somehow bring those loans current and restore the poor credit ratings they have caused your husband. They may end up choosing short sale or foreclosure, which will also appear on your husband’s credit and affect him dramatically.

This is especially why coborrowing or cosigning in any way, shape, or form takes considerable evaluation and consideration before agreement. Many people do it out of their kindness and desire to help a friend or relative, but forget that they are also on the line for the debt. Good luck.

Copyright © 2011 Roxanne Carr
This article is a forum to explore real estate principles. It is not intended to provide tax, legal, insurance or investment advice and should not be relied upon for any of these purposes.
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Ready to Buy? Not Really.

Question:
“My wife and I are considering buying a house. Currently, her FICO scores are in the 550-575 range, mine 620-650. We are disputing a couple of items on our credit reports and expect both scores to go up. I will make about $70,000 this year, she $25,000. We don't have a lot of money to put down. In fact, the down payment will probably come from a relative. I have about $1700 in 401k, but that is all our real savings. We have a bankruptcy that is over four years old. Since then, she has a credit card that recently had some late payments, but we have a payment plan worked out, and we are trying to get them to remove the lates from her credit report. I have a credit card with no late payments reported; the account is closed now, but balance is paid down to about $750.

We have two brand new cars we purchased just over a year ago with perfect payment history, and we each have at least one purchased prior with perfect payment history. Do you know which lenders would use my score over my wife's? Lastly, the house we would like to buy is listed at $199,500. (Monthly expenditure for car payments and credit cards is about $900.)” S., Roseburg, OR

Answer:
It sounds like you are on the right track--sort of. You should definitely be focused on getting rid of all credit card debt, absolutely, but keep the cards open and use them wisely. And I must ask why the two new cars when you have credit problems? It seems like that should have been put on the back burner if you really want to own a home of your own and are serious about the responsibilities it carries.

Your scores will be hampering your attempts to get a mortgage, as all programs have restructured guidelines, and credit scores are critical. The FHA program is probably best for you because it is one of the rare ones that allows down payment help from a relative less than 20%, and the required down payment is only 3.5%. Almost all lenders count the lowest of the scores between the two of you, and most are requiring a minimum 620 (FHA mandates at least a 580).

The sale price you are looking at seems reasonable, but even without a mortgage, you are not really handling your existing debt and are not saving. Be critical of yourself, take a hard look at your budget, and be sure this is the right time for you to buy. I am very concerned that you have not put aside any savings and even have had recent late payments. Evaluate all of the possible expenses of owning and the effects on your income before proceeding, and consult with experienced advisors. Good luck.

Wanting to Buy – Cleaning Up Credit

Question:
“My husband and I have been trying to get a loan to buy our first house. We looked into this a year ago, and our credit scores were really low so we decided to stick to renting until we paid off a few more things. Well, we were able to pay off most of our debt and now my husband's credit score is high enough for a loan, yet he only works part time. My credit score is still low but it shows that I have paid off the items, they just haven't taken them off yet. I work full time but since my credit score isn't high enough and my husband works part time, they won't let my husband and me get a loan. How long does it take for things to clear on the credit score after they are paid off? Would it be wise to find a co-signer and then once my score clears up, refinance to put my name on the loan and get them off the loan?”
R., New Milford, CT

Answer:
With this minimal information, I would suggest you wait until your credit score is high enough so you can both qualify for the mortgage. Without knowing your credit problems or your current score, it is hard to say, but generally scores move up and down very rapidly. If you paid off credit card debt instead of keeping the cards open, it would not necessarily help your score a great deal, might even hinder it. It is best to keep credit cards open, but use them wisely by charging no more than you can pay off each month and never carry a balance higher at any one time than 30% of your credit limit. However, if you paid off collections or consumer debt, it would definitely improve your score quickly.

Congratulations on what you both have accomplished so far. There will still be time for good buys and great rates even if you have to wait a bit. I think a cosignor would be a mistake at this early stage in your planning. Good luck.

Both Names on the Mortgage or Not?

Question #1:
“My boyfriend and I want to purchase a home. Is it possible to have both of our names on the mortgage or can only only one of us be on it? We are both first time home buyers.” C., Groveland, MA

Answer:
You can both be on title and on the mortgage as long as you qualify and have appropriate credit scores, and your first-time homebuyer status will be used as the program allows -- and as long as it is not a VA loan. VA is usually the only type of loan affected by marital status in that the veteran's mortgage eligibility is cut in half if he or she is taking title with someone other than a spouse, and lenders don't accept that without an appropriate down payment to compensate – and the loan must go to VA for approval for what is called a “joint loan.”

Remember my frequent reminder that whenever you purchase without the benefit of marital status you should get a legal contract between yourselves which will set forth all of the understandings between you and your co-mortgagor. Nearly one-third of the letters I get are about problems encountered later when circumstances change. Good luck.

Question #2:
“Hi there, my husband and I want to refinance, and his is the only income and can be approved for the loan on his own. Will it hurt my credit score to be left off the mortgage? Will I stay on the title?”

A. Fall city, WA

Answer:
It won't hurt your credit to have him only responsible for the mortgage. You will stay on title until you are removed (by signing away your rights), and it will depend on your new lender how that is handled. If you come off title, have documents signed so you can get right back on after the new loan records.

Even if he has the only income, there is no reason that you should be left off the mortgage unless it is agreed between the two of you or suggested by the lender because of other concerns. You do not need separate income. If your credit score is good, keep it all on the straight and narrow, be on title and be jointly indebted. That is only fair. Good luck.

Cosigning Problems Continue

Question #1:
“I co-signed for my mom a few years ago, and now she is going bankrupt. I have never lived with her in the house. Does that mean I have to go bankrupt too? Won't her going bankrupt alone take care of the debt for the house?”

M., Las Vegas, NV

Answer:
The Bankruptcy action can often take care of a mortgage debt; it depends on a number of factors, but probably not in this instance since you are named as a co-mortgagor. No, you don't have to declare Bankruptcy also, but you should realize you are expected to pay the mortgage if she cannot. That is what cosigning is all about – you take on the debt the same as the person for whom you cosigned.

Your credit will be severely damaged if you do not step in and handle the mortgage. Explaining that you were only a cosignor and didn't live in the house holds no value should you apply for any personal credit in the near future. Cosignors are expected to pay the debt if the primary obligor does not.

Question #2:
“I looked over your web site and couldn't find the answers to my concerns. We cosigned on a mortgage for our son and daughter-in-law; they fell behind so they wanted to refinance, and we cosigned again. Now, our son has been laid off and is behind again; we have made the payment several times over the last two years. We have ignored the last few late payment notices thinking the kids needed to step forward and be responsible. But just yesterday we got foreclosure notices, with only 27 days to take action. The kids are in debt beyond realistic measures and are considering bankruptcy and we are concerned about the effect on our credit. My husband suggested we buy the house in our names and rent to them. I think this would just enable them not to pay the rent because they know we would. It was suggested they sell the house but the value may not be enough to cover the mortgage. Any other suggestions?”

A. Loganton, PA

Answer:
I am not sure I have any additional advice for you. You are probably right about the buy it-rent back situation, but there are very few solutions for you in your muddle. Your credit is going to be ruined for several years if the foreclosure does go through. At this point, maybe have them Quitclaim their interest in the house to you, sign an appropriate agreement, bring the loan current and then you own it and can do with it what you wish...whether that includes renting to them or not. Refinance later to get the loan only in your names. That's one of the few ways you can start cleaning up your credit, which has already been damaged by the late notices and Notice of Default. Good luck.

Question #1:
“I am a 53 year old veteran who has never used his VA home loan and am considered a first time home buyer. I am looking for a 2bd mobile home. I would like any and all information that you might be able to provide me. I am looking at mobile home parks where you own the lot as I am not interested in paying rent plus a house payment. Thank you for your help...and by the way congratulations on such a successful column.

A., Oceano, CA

Answer:
Thank you. Check around carefully for a lender and learn about their requirements before you proceed. Many VA lenders do not lend on mobile homes anymore...primarily because of the lengthy paperwork involved, the differences between mobile home lending and stick-built lending and possibly the previous defaults in disaster areas. If they do, they would require that ownership of the lot definitely be a requirement and the unit must have been built no earlier than July1976.

Question #2:
“I wrote previously re 30 days for VA approval. Well, the answer was we were denied, the loan officer said VA said I needed to be on my job for two years. It is strange being the sales counselor and loan officer knew from day one I just started my job 18 months ago. The two of them have been telling us all this time everything was fine, we would be approved. I want to know does VA make this decision or is this company giving us the run around? Can we still apply for other mortgages?”

L., Austin, TX

Answer:
This really illustrates how important it is that you choose a very good mortgage advisor. Yes, the general rule is that two years’ experience in the same field is needed, but often this can be offset -- was it a move upward into a new, better field, with improved opportunities; maybe it was a first job after getting education for this field. You may have to get your contract extended, but I wouldn’t give up. Can you get a letter from your supervisor extolling your virtues, saying what a good future you have, for example. A really good mortgage banking company or other direct lender can assist you in putting together an argument to "state your case." It is the lender that makes the decision, not VA as VA does not typically deal directly with loan applicants.

At this point, if I were you , I would find another lender; yes, you can apply for other financing --- and I would ask your present lender if this denial came from its lending source (I assume you went through a mortgage broker). You have a right to know all the details, especially if all other factors in your case are favorable. You may also call your local VA office and talk to them, ask for advice, possibly file a complaint. Good luck.

"Reverse Mortgage the Solution?"

Question:
“I have a tangled weave to describe. My parents retired in 2005 in NYC while I still lived with them, going to school. My sister took out a mortgage and bought a house for our parents in Durham, North Carolina where we, which consists of my sister, my parents, my brother who is permanently disabled (born with profound retardation and autism) and I all lived for a time. My sister then moved to DC and now rents an apartment. I am looking to start my own household and leave the home as well.

Currently we're all chipping in to cover the mortgage; however that will not be possible for long. My parents only income is social security and pension and SSI from my brother which does not cover the full costs of the house. My sister is currently unemployed in DC. Ideally what we would like is for the house to be under my parents name and get an affordable mortgage for the parents that pays off the current mortgage my sister has. We are more than willing to explore any alternative options. I have no idea how to begin with this.”

C., Durham, NC

Answer:
Two things come to mind. One is that your parents may actually qualify for a new mortgage on their own, with today’s low rates. Find a good mortgage advisor in your area and look into the possibilities of an FHA refinance. Their income is probably income tax-free and could be “grossed up” 25% to equal similar taxable income for qualifying. Your sister would have to Grant Deed co-ownership to your parents and let that title “season” a while before the formal application can begin, but in the end a new loan would be funded, she would be paid off and come off title.

The other possibility would be better -- if your parents are 62 years old or older – provided the value is sufficient, they could apply for a Reverse Mortgage after the change in title is “seasoned.” This could pay off the existing mortgage, drop your sister from title, and leave them debt-free as long as they remain in the house as their principal residence. Good luck.

"Simple but Important Questions"

Question:
“My husband and I are on social security. Would we still be able to procure a home loan?”

R., West Des Moines, IA

Answer:
There should absolutely be no discrimination against your Social Security income. It is, in fact, considered very stable and can be an advantage for you. Qualifying for a home loan will depend on your total income and total debt, and, of course, the all-important credit scores. Good luck.

Question:
“Will you help me to look at my loan documentation from loan officer who sent and just wanted me to sign and mail back?”

H, Milwaukee, WI

Answer:
I am sorry, I can't do that for the State of Wisconsin...things may be quite different there even though standard mortgage documents usually apply throughout the Nation, as prescribed by FannieMae and FreddieMac.

I suggest you seek a good mortgage advisor in your own area. In my opinion, no lender should just send you things to be signed. A mortgage is generally quite complicated, and everything should be explained to your complete satisfaction! Just signing things put in front of you without honest and thorough explanations was one of reasons for the “sub-prime mess” that helped trigger the recession. People got into mortgages they did not understand or even were intentionally misled about by unscrupulous mortgage persons. The documents will bind you for many years to come. Maybe you should find another lender. Good luck.

"Cosigning Concerns Continue"

Question:
“My brother asked my husband to cosign for a home. My question is if he accepts to cosign for him, can it affect if my husband wants to get a loan for himself in the future, for example, a $60,000 loan to purchase a mobile home?

M. Angleton, TX

Answer:
Yes, it may affect him in the future. It all depends on his income and the other facts which are reviewed when he wishes to qualify for another loan, of any type. It will appear as a loan on his credit report because as a cosignor, he is equally responsible for the debt. He should not cosign for anyone unless he can afford to pay for it if they cannot. Good luck.

Question:
“Seven years ago, I was coerced into cosigning on my sister's mortgage. I was only 23 at the time, a new college graduate, and I did not have much credit. It wasn't bad credit, just not a lot. Earlier in that year, I did not have enough credit to get a car loan on my own, so I had to get a cosigner myself. I did not want to sign on this loan, but I was young and naive, and bullied into it both by the loan originator plus my sister and brother-in-law. My sister is a stay at home mother with no income, so they wanted to use my income. Their lender refused to let me go after having written a formal assumption letter, basically begging to come off. I now believe that I have fallen victim to predatory lending practices, as I did not meet the qualifications of a coborrower. I have been married for five years now, and we would like to purchase our own home. I feel trapped, and could really use some advice. My husband and I just want to move on with our lives. I would have excellent credit, if it weren't for my sister and her husband. I've never made a late payment on anything, ever. My credit was ruined by them before I was able to build it up.                    A., Weymouth, MA

Answer:
These can be the horrible consequences of cosigning; I am so sorry. It appears you are stuck and will have to live with the bad credit that was caused by your not paying the mortgage (which, as you now know, was also your responsibility). You may have to rent for a few years and wait for that first home while your credit ages. Good luck.

Copyright © 2010 Roxanne Carr
This article is a forum to explore real estate principles. It is not intended to provide tax, legal, insurance or investment advice and should not be relied upon for any of these purposes.
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"Don't Lie to your Lender"

Question:
“My parents lost their home and filed for bankruptcy in the last two years. Prior to that they had very good credit; my stepfather was in an accident that put him out of work for an extended period which contributed to their financial trouble. They are looking to buy a new home and have found one that is in their price range, and they asked me to consider putting the loan in my name with my grandparents as cobuyers. My parents would make the full payments and reside in the home. This would be my first home loan with my personal goal of buying a home in 5 years. My parents would let me keep the tax credits to save for a down payment on my own home and would have the home transferred to their name in 3-4 years. I am unsure if this poses legal problems or would be a problem when I go to buy a home in 5 years.”

K., San Jose, CA

Answer:
Many problems could be encountered in your scenario, the primary being that it implies fraudulent activity unless you are totally upfront with your lender that this will not be your primary residence, and your application is to be treated as an investment property. At least that is what I gather from your question. The same can be true for the tax credits.   It must be your primary residence to be deducted in that category or treated in Schedule F as expenses for a rental.

If I have not misunderstood your intention not to occupy the property, then don't do it! It is the wrong way to help someone, and you may end up in deep trouble. The same would be true for your grandparents. Also, once you are obligated on a mortgage, generally you stay that way until there is a refinance. People can’t just “put the loan” in your name later. Let your parents rent and wait until their credit is revived, or you buy it and rent it to them. Good luck.

Copyright © 2010 Roxanne Carr
This article is a forum to explore real estate principles. It is not intended to provide tax, legal, insurance or investment advice and should not be relied upon for any of these purposes.
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"Finding a Lender in the Future?"

Question:
“With loans being bundled, etc, many people have had trouble finding a person to negotiate with regarding payments or loan modifications. With the low refinance rates, how do you pick a company that you can have a safe relationship in the future with and can find people who are willing to negotiate in the coming years?”

C., Lansdowne, PA

Answer:
Tough question, especially in light of what has happened the last 2-1/2 years. I don't know how you can count on what company and what policies and procedures will be there in the future, and even whether the people you find now will remain with the same company.

Thousands of stressed borrowers have learned that they are unable to find anyone to talk to about loan assumptions or modifications, partly because the lenders are inundated with inquiries and partly because they have hired new, rather inexperienced personnel to try and stem the tide.

My suggestion is that you try to find the most reputable lender in your area, based on as many personal recommendations from friends and associates as you can find, and work with them, hoping for the best in the future. Modifications are definitely not something done simply or quickly - or very often – even without the mortgage meltdown, they were never easy to find or to accomplish. As you say, mortgages are bundled. This puts lenders at a disadvantage in trying to change any terms in the future. I suggest you just get the best fixed rate mortgage you can at this time so you can be set for the future and maybe not need changes. Good luck.

Copyright © 2010 Roxanne Carr
This article is a forum to explore real estate principles. It is not intended to provide tax, legal, insurance or investment advice and should not be relied upon for any of these purposes.
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"On Title But Not On The Mortgage?"

Question:
“I lived in my home for 16 yrs. paying a mortgage with my mother. She died in 2004; my boyfriend wanted to help me pay the mortgage last year 2009, and he asked to be on the deed since he was paying most of the mortgage. Only two weeks ago, he decides he wants to refinance the house because his credit is great and mine not so good. He wants me off the mortgage, but says he will put me on the deed when they draw up a new one. Does this sound shady and is there any way once he gets the house refinance can they say (the Lender) that I can’t be on the deed. Please help he is pressuring me and I feel I shouldn’t do this.”

R., Lindenhurst, NY

Answer:
It is very wise to worry about such matters and be careful. You can be on the title as owner and not be on the mortgage, that is your decision. If all documents are done by the attorney or escrow concurrently, you should be safe; however, you can definitely be hurt if he does not pay the mortgage on time consistently. I would prefer you work on your credit and get your scores up to where you can refinance, with or without him, as you desire. It appears the low interest rates will be with us awhile.

I strongly urge you seek legal advice and, of course, be sure and have a legal contract drawn up that sets forth ALL of the understandings between you. Work with a good lender. Some would require you also be on the mortgage if you are on title, but definitely not all. Good luck.

Copyright © 2010 Roxanne Carr
This article is a forum to explore real estate principles. It is not intended to provide tax, legal, insurance or investment advice and should not be relied upon for any of these purposes.
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"What About Low Credit Scores?"

Question:
“My wife and I are considering buying a house. Her FICO scores are in 550-575 range; mine are 620-650. We are disputing a couple of items, and I expect both to go up a bit. I will make about $70,000 this year, she $25,000. We don't have a lot of money to put down; in fact, the down payment will probably come from a relative. We have a bankruptcy that is over four years old. Since then, she has a credit card that recently had some late payments, but we have a payment plan worked out and are trying to get them to remove the lates. I have a credit card with no late payments and it is paid down to about $750. We have two brand new cars we purchased just over a year ago with perfect payment history, and we each have at least one car purchased prior with perfect payment history. I have been looking at HomePath loans and FHA loans. Do you have any advice on which would be a better option for us? Do you know which lenders would use my score over my wife's? Lastly, the house we would like to buy is listed at $199,500. Is that realistic given our numbers? (Monthly expenditure for cars and credit cards is about $900.)”

S., Roseburg, OR

Answer:
It sounds like you are on the right track--sort of. You should definitely be focused on getting rid of all credit card balances, and stop using them, just keep them open. And I must ask why the two new cars when you have had credit problems? You had a Bankruptcy and should have learned not to overextend yourself. If wanting to buy a house is important to you, new cars can wait until you can really afford them, as well as all other unnecessary spending. It is past time for you to be saving if owning is important.

Your current scores will be hampering your attempts to get a mortgage; all programs have restructured guidelines and credit scores are critical, just as important as your income and debt, as they should be.   Most lenders would count the lowest of the scores between the two of you and require at least a 620. The FHA program is probably your best bet because it is one of the rare ones that allow down payment assistance from a relative under 20%, and the required down is only 3.5%. Be critical of your current situation and whether you should even consider owning a home at this time. Set yourself a firm budget to save and continue cleaning up your credit. If you can’t save, you won’t be prepared for home ownership. There are always unexpected additional expenses after purchasing a home. Good luck.

Copyright © 2010 Roxanne Carr
This article is a forum to explore real estate principles. It is not intended to provide tax, legal, insurance or investment advice and should not be relied upon for any of these purposes.
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"Can We Trust Online Appraisal Info?"

Question:
“My barber of ten years recently approached me and asked me if I would be interested in being her partner for her house. She has two loans in which she's been late on the second loan. I looked at her house on Zillow, and It says that her house is worth about 80k more than what she owes (310k/38k). I explained to her that it would not be wise for her to allow me to just put my name on the title; however she doesn’t want to go through the hassle of selling but just wants help with the payments and because she has known me for so long is fine with her decision. My question is, although her name will remain on both loans, will my name being on title affect my credit if she has not made the payments on that second loan? Would this be a good deal for me?”

M., San Diego, CA

Answer:
I could not comment on whether this would be a good deal for you, not having more specific information about the area and the property and the actual appraised value. But as to other part of your question, if you are just on title and not on the mortgage(s), your credit should not be affected. You would have to be liable on loans for them to show up on your credit.

Being on title, however, does expose you to other circumstances and possible risks, and you definitely need legal advice before proceeding. I always recommend a legal contract when joining on real estate because things do change; people die, people want to part company, people want to sell or not sell, people find they do not have the same understandings as they thought in the beginning, etc., etc.   Regardless of how long you have known each other, you need to have all matters between you set forth in a proper, written agreement.

Also, she needs to check further with her lender as to her rights in having someone added to title. Most mortgage instruments have a “due-on-sale clause,” which allows the lender to call the loan for any change in ownership, and although she will remain on title, adding you would be a change. Whether the lender would activate that clause for an additional person on title depends on its procedures.

Lastly, I would add that Zillow is only as reliable as the information accessible to it. Quite often properties are shown as much lower in value than their actual value and often the reverse. The site does not have all the facts about the comparables and is unable to truly compare sales as an individual appraiser would. I suggest you ask a friendly Realtor in your area for a market value. Good luck.

Copyright © 2010 Roxanne Carr
This article is a forum to explore real estate principles. It is not intended to provide tax, legal, insurance or investment advice and should not be relied upon for any of these purposes.
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"Honesty is the Best Policy"

Question:
“My parents lost their home and filed for bankruptcy in the last two years. Prior to the last two years they had very good credit; my stepfather was in an accident that put him out of work for an extended period which contributed to their financial trouble. They are looking to buy a new home and have found one that is in their price range.”

“They asked me to consider putting the loan in my name with my grandparents as cosign/buyers. My parents would make the full payments and reside in the home. This would be my first home loan with my personal goal of buying a home in 5 years. My parents would let me keep the tax credits to save for a down payment on my own home. My parents would have the home transferred to their name in 3-4 years. I am unsure if this poses legal problems or would be a problem when I buy a home in 5 years as it would not be my first. Any advice would be helpful as I have very little knowledge of the home buying/lending process.”

K., San Jose, CA

Answer:
It is very admirable that you want to help your parents. Consider, however, that many problems could be encountered in your scenario. Unless I misunderstand your intent, the primary challenge is that it appears it could involve fraudulent activity on your part unless you are totally upfront with your lender that this will not be your primary residence, and your application is treated as an investment property.   It will help that your parents will occupy the property and hopefully sign a lease for you and your grandparents.

As to the tax credits, you must meet the IRS requirement for deductions. They are treated differently for primary residences and rentals. Your concerns are good; just be careful. I would suggest a legal contract with everyone involved, to set forth any and all understandings for the future. As a further note, whoever is on the mortgage will usually stay on the mortgage until it is refinanced. Though ownership can be changed fairly easily, you would still be responsible for the debt, and of course it could affect your qualifying for another home loan. Good luck.

Copyright © 2010 Roxanne Carr
This article is a forum to explore real estate principles. It is not intended to provide tax, legal, insurance or investment advice and should not be relied upon for any of these purposes.
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"Taking Over House Payments in the Wrong Way"

Question:
“My husband and I were looking to buy a home when our lease expired on our apartment in July. We then found out his sister had fallen behind in her mortgage payments, and her home was about to be foreclosed on. She informed us that we could take over the payments and finish paying for it. Since my credit was not good, but my husband's was, we jumped at the deal. Well, we paid nearly $15,000 upfront to make up the delinquent payments to stop the foreclosure, and we started paying the payments the next month. We were told my husband's name would be added to the deed until he could qualify to get the house financed in his name. That has not happened, and we have done repairs to the house and are paying a very high mortgage payment. We do not want to continue this if we are not going to be the owners, and are just renting. Can a name be added to the deed? Should we pursue this, or just get out now?”

Answer:
His sister should have quitclaimed her interest to him before you paid the dollars it took to bring the loan current and certainly before you started making repairs. It is rather easy to be added to title, but not to the mortgage. Possibly negotiations with the lender could have had your husband added to the mortgage. It was certainly worth pursuing at that time, when the lender might have allowed an assumption due to the circumstances.

I suggest you get legal advice immediately, and you might consult with your local title company for assistance with the necessary forms for his sister to sign and have them properly recorded. Really, such a big step should never be taken without the proper legal assistance. The minor cost involved can save you so very much in the future. Now that you have spent so much in dollars and effort, I urge you to stay with it, but get the proper paperwork done so you are protected. Good luck.

"Needs Cosigning Help?"

Question:
“I'm very interested in a townhome and unfortunately I would need a cosigner. My parents have bad credit. My fiancé does not show income (he works off the books) and we are getting 20% down as a gift. What can I do in order to get this house with out a cosigner??? Please advise!”

Answer:
You are truly lucky that you are getting 20% down as a gift. Beyond that, you certainly need help. Are you positive you cannot qualify alone? First, check with an experienced FHA lender in your area, one highly recommended to you and see how far you are from qualification. FHA only requires a 3.5% down payment, and 20% down is considered a very strong compensating factor for high debt ratios, if all else is in order.

Hopefully, your parents are working diligently on their credit cleanup. Most programs do require that any cosignor be related, and of course you must consider the responsibilities of cosigning for the person or persons doing it.

If it is accurate that you cannot qualify alone and you have no other close family person able or willing to cosign, your best alternative is to wait, be frugal, save your money and get rid of any debt you have. There will be other properties you are interested in and opportunities will come along at the right time. Build your credit and maintain a good work history, and work closely with that experienced mortgage lender.

Of course, if at all possible, your fiancé should be declaring his income and establishing a work and income profile. He will definitely need it in the future; working for cash can hurt one in many ways. Good luck.