Real Estate and Home Mortgages - Any experts advice needed HELOC

Hello,
This gets a bit complicated but I think the experts out there might be able to help and I will try to keep it simplified.

I have a new home that I current have a five 5-year adjustable at 5%.
Also have former home on the market. The former home has been paid off as we acquired a Home Equity Line of Credit to buy the property for buiding our current home. The HELOC was lowered a number of months ago to 7.25% after being at 8.25 % last year (after we called the bank requesting a lower rate). As we have spent over 33,000.00 a year in interest only the past 3 years on these two loans (Home Equity and current Mortgage) thinking that was the least they could do.

Now I am wanting to get the HELOC changed to a fixed rate loan. The bank says they will work with us and it looks like they will give us a 30 year loan at 6.36% with 2,000.00 for closing. Should I look elsewhere or does that sound reasonable? As we have been told we have excellent credit
We were told our credit score was the highest possible I think he said it was 800 and something.

Also here is the tricky part. We have a potential buyer for the home on the market. However, he wants to buy the house on contract. Putting 20,000.00 down and whatever terms we can agree to. I still think we should get the HELOC changed to a fixed rate. We are not very financially savvy when it comes to these things. Any advice or help would be most helpful and greatly appreciated.
Thank you in advance - Marcia

I'm sure someone else will contribute on whether or not that interest rate and closing is good, although they both sound good to me. But, on whether or not you should do it, YES, YES, YES.

This is not a good time to be in an adjustable rate loan, I'm not sure there is a good time to be in one.

You said that you "may" have a buyer; "We have a potential buyer for the home on the market. However, he wants to buy the house on contract". Well, he may, or he may not. Why does he want to buy it on contract? Usually only "deadbeats" have to buy on contract. If he has $20K to put down he should be "bankable" almost anywhere. If he isn't bankable, why would you want to lend money to someone that banks won't?

Get the fixed rate. If the house sells you can pay it off. But $2K closing costs is cheap insurance against rising rates.

frank

I'm with Frank on this.
The rate and fees sound pretty darn good to me too.

As for the "buyer", I'd say either they actually purchase the house or hold off for someone that can. If they can't get approved for a loan, you can take that as a very good indication that you don't need to count on them as a real buyer. Don't take on an obligation with these people that billion dollar lenders aren't willing to risk--with mortgage insurance to boot. You've got more to lose and much higher risk.

You don't know what condition you'd get the house back in if they default on the agreement--but most likely it'll have less value and you'd wish you had held out for a sale.
Just my 2 cents on that.

Thanks Frank and Bill for the help.

I agree that the guy should be bankable. The problem is a bit complicated and my husband is positive the guy is legit.
This guy was divorced 2 years ago and is still paying off debt on a half million dollar home and alimony and other debt incurred from the divorce. He has agreed to show us all his w2's, bank acct. etc. He makes a good living but he does not think the bank will lend him the money to buy yet another 279.000 house on top of everything else for at least 6 months.

The thing is we have had our house on the market for over 2 years. The first year the realtor had home appraised at 465,000.00. I think her appraiser was high. So the next year we went with a different realtor. She listed it at 365,000. then left the company in the middle of the listing to go with another firm and we were never notified.

Being unfamiliar with home selling we had just assumed there was no interest. Turns out we were not on the multiple listing for who knows how long- only found out when this absent minded realtor sent us a letter in the mail asking if she could list our home. My husband caller her and gently reminded her that supposedly she had our listing! She apologized profusely then proceeds to tell him that she had left the other real estate company long ago and forgot to tell us.
So we now have lowered the home to way below market value at 279,000 just so we can get out from under all the debt. We have it listed on an online for sale by owner website and not on the multiple listing.
So husband wants to give this guy a chance. I however am reluctant.
I worry not only about possible damage by the occupants (the contract buyer has custody of his 14 year old and not sure of the other but think a teen)but worrying if there might be other risks to consider?
I asked husband what if this guy meets a woman and she wants to move elsewhere or? I am sure there are other risks that we are overlooking?
I just feel desperate but do not want as you say regret it later.
Marcia

Beware people offering too much information. W2's and pay stubs can be falsified.
Perhaps get him to sign an IRS form 4506t and get a transcript of his tax returns. That is the only way to know about income for certain.
Some people out there will try to work out an arrangement like this, thinking that they can sell the house where you can't. They get the house for essentially nothing and then arrange a buyer. They may close with you and then their buyer the same day, or if they are working with a crooked title agent on this, they may close their sale FIRST, to get money, and then buy the house from you. Obviously that's not legal.
Just be careful.

Wow, all of a sudden we're getting more information. What I said about the getting the fixed rate loan stands. What I said about not jumping into a deal with this guy stands-if he's "working like crazy to pay off past bills", WHERE IS HE GETTING $20k IN CASH?

If the only marketing you're doing at present is on a "sale by owner" site and/or craigslist you need to slow down and take a deep breath. There is nothing wrong with selling a house by yourself, I've done it close to 100 times. But I've done it close to 100 times! That's more houses than the "average" (part timer, store hopping, wannabe) Realtor will sell in their (average of less than a year) CAREER.

In other words it doesn't sound as if you really KNOW what the real world Fair Market Value of the house really is, do you? I would recommend that you find a GOOD, COMPETENT, HARD WORKING Realtor!, Or two. Get them to provide you with REAL WORLD comparable SALES PRICES, not listing prices, along with the average DOM (days on market) for houses similar to yours in price, condition and neighborhood.

You will find these agents by looking around the surrounding neighborhood for which agents have the majority of listings/signs in yards. Look in the Sunday paper and the freebie real estate magazines and see which agents do the most advertising. Those are the PRODUCERS. In the average "market", whether it's an entire small town of about 15K, or a segment of a big city, like a big "trading area" of Houston, Dallas or Minneapolis, there are only going to be about 3 or 4 PRODUCERS.

Those few agents will generate 1/2 the business, and INCOME in that area. You want one of those agents.

If the "comps" come in at $279K then that's your price. However, I don't thnk you really know that yet. At least from re-reading your posts I don't think you KNOW it.

frank

Hello Frank,
I can't thank you and Bill enough for the posts. I had husband read what you and Bill had said and he seriously took it to heart. In fact, he was out of town on business and got 2 calls on the house. One of which was a previous interested party. So he thought to himself maybe we should re-consider the contract deal. Then I showed him your post and he called the guy and told him we were really not interested in a contract as we had already turned several others away.

We did do the comps thing in the beginning for the home we have on the market. Houses in our neighborhood were all over the place for the same amount square footage only lot size or being on the water making the difference. Of course this was 3 years ago when the market had not fallen so much. Comparable homes were selling any where from 365,000-765,000.00. So our first realtor said to list at 465,000.00 which sounded high to me. However realtor said we had a nice 1 1/2 acre secluded heavily wooded lot that would bring the buyers as the average lot only was going for 65,000.00 without woods in our area. The house is 3,000 square feet which was the common denominator. The 700,000.00 were for homes that were in our neighborhood but were on the reservoir water. Our home was custom built with all upgrades. 20 ft. ceiling with all Andersen windows throughout, kohler cast iron tubs.etc...so we went with her advice.

I had my doubts about the second realtor. She was older. I wanted to go with another who was very young but she had the highest number of sells for her company. Still kicking myself that we did not use her.

Anyway, keep your fingers crossed that we have our buyer tomorrow.
The guy that wanted to buy on contract now says he wants to talk about buying it straight out and then the previous interested party called again wanting to do a walk through. The contract guy wants it very much
as it is down the street from his work place.

Either way you can count on us getting the fixed rate in place if they do not buy outright.

Again we truly appreciate all your input and insight and will keep all you told us in mind.

Marcia :-)

Excellent, I think this is all going to work out well for you.
It's no fun to do, but it's best done right the first time so you have no regrets later.

Excellent, I think this is all going to work out well for you.
It's no fun to do, but it's best done right the first time so you have no regrets later.

Hi Bill & Frank,

Well, the deal fell through. Husband met with the one guy that wanted to buy on contract. He still wants to go that route. He says when his divorce went through 2 years ago he signed over power of attorney to ex. as he had become seriously ill and in hospital.
She sold the house for less than the 500,000.00 still owed therefore he still owed 40,000.00 for which he was responsible
So now he has this bad mark on his credit. His attorney saying he can't get another mortgage until this is settled.

He has paid all but 25,000.00. Which he wants us to give him 6 months to pay that off. My husband met with him today and was able to verify his income. So feel like we are back to square one.

We are in conversation with the bank on getting the HELOC switched to a fixed rate. I mis-typed the rate I quoted you all the other day should have
been 6.75 instead of 6.36. So husband just now called bank again and they gave us a lock if we give verbal agreement by end of the day for a new rate of 6.50 plus 2,000.00 down. I felt like we should not have to pay the full 2,000.00 closing costs as they have all of our info for all of our 5 accts. with them. They told husband that we may qualify to have some of the 2,000. knocked down by not having an appraisal down.

Any thoughts? Does that fixed rate sound o.k at 6.50? I know it is much better than the variable home equity rate we are now paying them of 7.25.
It infuriates me that we waited so long on it as I too am a proponent of fixed rates. However at the time the rate was 3.75 per cent and we thought our other home would have sold. Caught us in the behind and now we are paying dearly.

So regardless I don't even want to wait on the other potential buyer.
By the time they get whatever done another several months could pass.

Am I making a mistake running to the bank or should I wait for the other buyer to make his offer?
Any thoughts would be helpful.
Thanks to all that have responded.
Marcia :-)

The rate still sounds fine.

Have you see this guy's credit report? There's no reason you can't have him pull it, in front of you, so you can take a look.

Why do I ask?

"She sold the house for less than the 500,000.00 still owed therefore he still owed 40,000.00 for which he was responsible"

Just how do you sell a house, which by nature means transfer of ownership, while there are existing liens on the house? You don't sell a house have $40,000 "left over". Take a look and see how this is treated on his credit report. Maybe the bank agreed to transfer the remaining balance to a loan to release the home, I don't know, but you need to find out. Be sure there are NO late payments on there. Often, people that own a house and get divorced, think that only the other spouse is liable for the mortgage since they signed a quit claim. That's not true. As long as that loan exists, regardless of a quit claim OR divorce decree, both are still equally liable for the debt. You don't have to be married to buy a house together, and you don't have to STAY married to owe on a house either.
If this mortgage is behind, just clearing up the balance on the debt isn't going to make him ready for a new mortgage---he still has this history on his credit report.

That may all be wrong, but that whole situation sounds odd to me. You're banking on the fact that someone not capable of financing now will be able to obtain it later. That is never a good plan.

Has he produced a pre-approval letter from a reputable lender? It can have a contingency to get ___ cleared up, but that would be something. It takes a lot more than a good income and debt ratio to buy a house.

Ok Guys,
Here's the latest. I was all psyched up to get my fixed rate of 6.75%
then our bank guy tells us that since the other house is not our primary residence we cannot replace the Home Equity Line with a fixed mortgage.

What the heck do I do now?

Please help?
Marcia

Find a new lender!

Might consider waiting to see what happens with the sale at this point.
How much money are we talking about here?

Might consider waiting to see what happens with the sale at this point.
How much money are we talking about here?

Hi Bill,
The contract sale of the previous home is 279,900.00.
This was not our first choice. However, I am hoping I have covered all the bases in a proposal typed up prior to giving him the final contract. I was a legal secretary in my previous life so I am fairly certain I have most of the major info covered.
Buyer is submitting a 10,000.00 down payment and 1,800.00 per month for the first 6 months to year (the realistic time he thinks it can buy out the contract). If the house has not been purchased within this time another 10,000.00 will be owed at the end of that period.

I still would like to get a fixed rate on that HELOC even though the contract agreement will stop the bleeding. I am thinking fixing the rate would be the smartest thing to do in the event something happens and he does not follow through within the next year.


Also he is buying the house in pretty much "as is" condition. House needs a new roof and heat pump. We are servicing the heat pump and finishing exterior painting other misc.
My husband feels this guy really wants to keep the house and although the house is in good condition except for roof he is replacing the formica counter tops with granite and putting in new flooring. We had just put in new carpet however he wants to replace with hardwood flooring. We do not have a problem with that. We have a line in the contract whereby major structural
changes is done only after all parties agree,etc..

We had a number of stipulations that he not tear down the natural screening of the heavily wooded lot..He agreed as that is one of the reasons he wants the home.

One other point of contention is with a Church next door. Their property of approx. 4 acres along with our 1.5 acres had belonged to my husbands Grandfather. The 1.5 acres some 20 years ago was a wedding gift and we built a drive onto our property at that time. Turns out that husbands Grandfather sold the church the land nearly 15 years later which comprises our driveway. This was not told to us - we found out one Sunday morning when we were awakened by loud noises. We stumble out of bed to find a group of people at the end of the drive holding a prayer service. Husband goes out to find out what the heck was going on and they tell him they now own our drive.
The Church since built and utilizes their own separate drive.

We have been told that they cannot ban us from using the drive we built as we have used that drive for over 20 years. Something about right of way or domain. It is far from the actual Church structure and parking lot. You cannot access the Church from our drive because of a retainage pond which separates the two properties. The Church wanted us to sell our house to them years ago but wanted to pay less than what we had in it. They have been a thorn in our side for years. Once trying to bring suit against us without warning for brush that had grown up close to the road (actually on the counties right of way down from that drive). We used that drive every day for twenty + years without any problem. If you would see what they sued over you would laugh as it is actually a border to the woods and no place near "our" drive.

Also we had a potential buyer ready to close on the home when we first listed(at a higher asking price no less)>
The potential buyers called us telling us that they had been in contact with the Church which stated to them that they (The Church) would not allow them to use the drive. Therefore the sale did not go through.

We have offered a number of times to "buy back" our drive from the Church they would not sell to us. Then when we ask if the new owners can use the drive they tell us "no, they do not want to be responsible for any accidents."

We have always disclosed this to potential buyers including the man that we are now selling to. I am not sure how this is all going to work out once the Church knows the house has been sold. I am afraid they will bring suit.

My thoughts would be to build another drive but that would take a lot of mature trees out and definitely be a lot of money and work. The area where the drive is currently located is open field and no place near the Church. However; they did one year go through the drive and cut down a bunch of trees that wraps around our property. This is an extension of land that they had purchased - it borders the other side of our property. They cut down all the mature trees so they could put in a picnic table. Used a couple of times at most that year and not been used since. Again this is no where near the Church structure or their paved lot - the retention pond also separates that land. So they spent all that money to doze out all the trees which took away a lot of screening and privacy adjacent to our woods.

Anyway, the saga goes on.
Marcia