So back in July I helped my brother purchase a 2 family foreclosure (Bank owned) property in a location that seemed like an Ace in the Hole! The property sold two years ago for $360,000 and we were paying around $130,000 cash for it. So we maxed out some credit cards (fun hah) and borrowed money from family and a friend. I was certain that house was worth at least $240,000 if we bought it and put it on market.
It was a cash deal so we couldn't get traditional financing. If he paid with cash right away it would take 6 months before he could do a cash out refinance. This would take too long to pay back all these people he owned money to. So I thought the best thing would be to create a mortgage and then do a rate/term refinance which doesn't have any title seasoning requirements. So I became his lender.
Idea was to do a quick rate/term refinance with QuickenLoans so we could pay off the loans. Now, that was a roller coaster! Dealing with QuickenLoans was like dealing with bunch of monkeys in a suit and a tie. They changed the loan terms on my brother like 10 times...they couldn't get the numbers right...I felt like flying over there and giving them 101 loan origination.
TIP: You gotta stay on top of these loan officers! All of them! Call them! e-mail them! Do whatever! Let them know you're alive.
First he was qualified for the traditional loan but then the appraisal came in at $140,000 which was crazy compared to all the work and repairs we've done on it. The appraiser compared the house to bunch of foreclosures in the area... so that was a pain! The bank didn't agree with the appraiser so they ordered another one from someone else. They also changed the program now to FHA loan from traditional loan. I was ready to shot someone!
The second appraisal came in at $190,000 which was perfect for the traditional loan but it was useless now because he was in the FHA loan and if you do a rate/term refinance right after purchase they won't count the appraisal. They will base it on the purchase price. We asked them to switch back to the tranditional loan but they didn't want to change it because of that other appraisal being in the system...it was crazy! Anyway, it was insane and we just wanted to get it over with! I must admit...I was tempted to send them this video to show our excitement and the cartwheels we were doing. http://www.youtube.com/watch?v=vkuX0nKiAlU
Thanks to that first-time homebuyer tax credit of $8,000 made all this insanity worthwhile :-)
So few tips:
1. If you're thinking about buying with cash: remember that you won't be able to cash out in 6 months. There are lenders who will do it right away but it's very very very expensive.
2. FHA rate/term refinance no title seasoning max LTV 96.50%. Mortgage insurance required in this LTV range. So that's an extra $30-$60 per month.
3. Stay on top when you're dealing with loan officers. Call them every single day! Annoy them! So when you call them you won't even have to say your name and they will know who you are :-)
