Posted by JoeS on November 08, 2001 at 08:08:22:

Pretty straightforward; if all the ducks line up, she can offer a second mtg to the seller for the difference, higher than normal interest, with a 30 year am., and a 3 year balloon. That will give her the time to get it the house, season the first, and then re-fi both. Make sure that there is NO pre-pay penalties in either mortgage.


Posted by MARK on November 08, 2001 at 07:38:45:

Help me please!
My sister has found a 2 level/3 bedroom townhouse in Virginia that was originally selling for $109,500.
The seller later dropped the price to $108,500 and now has dropped it again to $106,500. All within 2 weeks!
I found out that the seller has found a bigger home to move to and needs to sell his old home quick! My question is this.My sister has been pre-approved for only $87,000-what creative ways can she use for the rest of the purchase price? Put on your thinking caps guys and help a woman in distress?

Re: LADY IN DISTRESS! - Posted by JoeS

Posted by JoeS on November 08, 2001 at 12:27:23:

Ed is right, but so am I. Remember that I said if all your ducks line up. Part of that is your DTI ratio, and most lenders will not go over 50%. BUT, if you reveal to the lender that you will have a second, it is NOT loan fraud. I would NEVER recomend to anyone anything resembling fraud!! Another way around this is to have the seller take back a second for the difference with a “no payment for 36 months” clause, I have done them. First find out the seller’s needs, and then try to fill those needs. Maybe he does not need the income from the second, and he can wait 2-3 years for the balloon payment. Just some more thoughts.

Re: LADY IN DISTRESS! - Posted by Ed Garcia

Posted by Ed Garcia on November 08, 2001 at 10:07:17:


First I’d like to CAUTION you with Joe’s suggestion. Although his idea, not only makes sense, but also is the obvious thing to do, it comes with a complication.

You see the broker that pre-approved your sister for $87,000, did it because that’s what she shows she can afford without being out of budget. If you have the seller carry-back the second the lender will also count that payment and then she won’t qualify for the loan because she still will be out of budget. In the business we call it their debt to income ratio.

It will be difficult to have the seller carry-back a silent second, because the lender will wonder where did the difference between the purchase price and their loan amount come from. I’m not saying that it can’t be done, but it’s definitely a risk and to be honest with you, it’s fraud because you’re deceiving the lender who is making a loan that they more than likely wouldn’t make knowing all of the circumstances.

One option is to go into the secondary market, or sub-prime and obtain a loan that will allow a higher debt to income ratio. Many go up to 50%. Mark, she may even to go into a NIQ, or stated income program that will help her qualify to purchase the townhouse. But then again, that loan because it’s higher risk, comes with a HIGHER COST, which again will put a hardship on your sister who is already out of budget.

Again Mark, here we have a catch 22, is your sister obligating her self to a deal that is more than she can afford? Forget the lender for a moment. The lender is trying to protect their loan by making sure the borrower can afford the payment. Although the lender is trying to protect their self, indirectly, they are protecting the borrower as well. It’s not uncommon for borrower to bite off more than they can chew, or over obligate their self because they got emotional in their purchase. They really wanted the property at all cost until they are in it and then come to the reality that they are choking on the payment.

You be the judge Mark, she’s your sister. If you want to get her a loan, or maybe she has income she is not disclosing, I’ll see what I can do. My number is (909) 944-0199.

Ed Garcia