Question About Refinancing
Hi, I don't know if this is the proper forum to post this question, but I'll give it a shot. About three years ago, I went through a divorce and couldn't purchase a home on my at the time, due to my terrible credit rating. My credit is still not good, mid FICO score of 520. To help me out, my parents purchased a home in their name, convential financing, 20% down 30 yr fixed at 5.25%. Although we have no written/legal agreements between us, we had a verbal understanding that I would cover the mortgage payments, taxes and insurence as well as paying for all maintenance/improvements on the house. I also agreed to repay them the 20% downpayment that they made on the purchase, approx $56K. I have put about $20,000 in improvments in the house, and have repaid $30,000 towards the downpayment. I have been preapproved for a 3/27 ARM at 7.39%, which would be structured as a cash out refinance. I should mention that there is a lot of equity in the home, (purchased at $272,000, current mortgage $211,000, appraised at $400K), so I would like to pull out enough cash to repay my parents the remaining debt I owe them for the downpayment, plus some additional cash to renovate the kitchen. Here's the problem, the lender is suddenly getty sticky during the formal approval process because although I have made 3 years of timely payments (electronic directl deposit to the loan account), it is not in my name. The lender said that they would want my parents to sign a quit claim deed to the property, as well as a borrower's certification, so that they could verify that the mortgage had been paid in a timely fashion. My parents are understandably reluctant to do this, because I believe a quit claim deed only removes their name from the deed, not financial responsibility for the mortgage, and the lender has as of yet made no formal approval on this loan. I am growing progressively more confused, because I don't really understand the legal/tax repercussions of purchasing the home from my parents using this type of financing. Is there another way that this deal could be structured so that I could purchase the home with no cash down, and potentially repay my parents in the future with a 2nd mortgage? Any help or advice that someone could offer would be greatly appreciated, since I am now feeling that this may not be the best way to go.
Thanks in advance for any responses.
This has a very easy solution. You and your parents simply draw up a land contract with the terms of the agreement. I live in a state where they do not have to be recorded. If you live in a state that requires it then you will have to record it.
Due to your credit problems I would not suggest a 3/27. If it has taken you this long and you only have a 520, you are on the slow plan. Take a higher interest rate or go for a conforming cashout, pay off parents and debt. This will improve your credit and put you in a better situation.
Lori
[addsig]
Lori, thanks so much for your response. You're right, trying to improve my credit score has been a long hard fight, largely because I have only just now begun to educate myself (through www.creditboards.com) about how to improve my credit score. Can I ask you what a "conforming cashout" is? Also, I had a feeling that a 3/27 was probably not a good investment, but I can't really affford a mortgage payment at 10% or higher, which is what I think I would get offered if I try to get a fixed rate loan.
Thanks for your help.
Karen
A paid collection is as bad as an unpaid collection. Fight like a berserker, sue people if necessary. Those negs will come off! Whoever put 'em on can take 'em off, and properly motivated (via methods found in the books of George Hayduke, if necessary), they will do so.
All you need to do is dispute it with the credit bureaus. It takes all of ten minutes to write a few letters to the various credit bureaus.
Best of luck,
Andrew
The Roto Rooter should be easy (that is if your tenant called them and you didn't sign anything). Send the collection agency a letter demanding 1. a signed contract showing you owe the debt, 2. an invoice showing the work done along with their 100% satisfaction warranty, 3. the agency's license to collect in your state. Tell them that you do not owe this debt, and unless they have specific proof that you owe this debt, you demand they remove any trace of it from your credit files or they will be in violation of the FCRA and the FDCPA, and you will contact the Federal Trade Commission and possibly your attorney. Make sure you send it certified mail to get proof of delivery. They have 30 days to respond.
If by some chance this doesn't work, sue in small claims court - they can't win without your signature anyway and the judge will most likely question their guarantee.
With the medical collections, disputing with the bureaus will most likely be your best bet right now, but if that doesn't work after a couple of tries, you might consider trying the first scenario I provided after the collection ages a little. This way, you give them time to "lose" their files on you and it becomes hard to find your signature. They would most likely delete it to avoid the hassle of sending you information. Good luck.
Well lots of folks here will give you advice about how to deal with the credit issues. But I gotta say that if I had an on-going relationship with a bank and they held me up on a relatively minor loan on this relatively minor stuff I'd find another bank.