Refi owner occupant mortg. after 2 weeks - Posted by Brian (IN)_


#1

Posted by PBoone on November 09, 1998 at 10:03:18:

The loan cost were pulled from what the closing cost range we pay for deals. I agree with you that the loan amount will change the cost. could be higher could be lower.
Pat


#2

Refi owner occupant mortg. after 2 weeks - Posted by Brian (IN)_

Posted by Brian (IN)_ on November 08, 1998 at 20:24:36:

I have a property under contract and have been negotiating with a potetential buyer who wants to lease/option it. I would like to get cash out up front by financing the property at 80% LTV (I bought it for 70% LTV).
I have talked with a mortgage broker who suggests the following scenario. I purchase the property with a 100% owner occupied loan with no pre-payment penalty and then refinance for 80% LTV two weeks later with a company that requires no seasoning on refi’s. Is this legal since you typically have 60 days to occupy the property for the first morgage?

Thanks for your help.


#3

Re: Whoa! I gotta back up! - Posted by Paul Macdonald

Posted by Paul Macdonald on November 09, 1998 at 15:15:28:

I committed a cardinal sin. I made an assumption. When I read your post I thought you were going to be a two week wonder owner occupant… move in and out in two weeks and refi the 80% deal as an investor with your l/o client the new tenant…

I don’t think you’d break any laws, but you would break the terms of the contract (the mortgage). So I apoligise on the assumptions. And I’ll back out of the conversation.

PJM


#4

Legal-Probably Not - Posted by Bud Branstetter

Posted by Bud Branstetter on November 09, 1998 at 12:35:45:

You have told use that you do not intend to live in the house. If you sign a statement on your loan app. to that affect you have lied and probably commited bank fraud.

Are you going to get caught. Probably not. The sixty days payoff should get you out of any potential problems. Are you sure the new lender will know that you have owned it for 60 days only. Or is it the broker is telling them something else.

I’m sure this is done frequently. You are the one that has to decide on the ethics.


#5

Re: Refi owner occupant mortg. after 2 weeks - Posted by Brian(IN)

Posted by Brian(IN) on November 09, 1998 at 08:34:58:

The morgage broker has agreed to charge me only one fee plus closing costs. Approximately $3,500 so this looks pretty good to me. I want to be clear though that I am an investor. I have no intention of occupying this property. I have told the mortgage broker this and she says for the 100% loan that I do not have to sign any thing that says I will occupy. Then we will refi this loan to cash out. Is this still legal even though I do not plan to occupy?


#6

Re: Refi owner occupant mortg. after 2 weeks - Posted by PBoone

Posted by PBoone on November 08, 1998 at 23:01:07:

Yes it can be done, A couple of things to consider
2 Loans = approx $7000.-$9000.
Lease option client backing out of the deal.
Unless you have successfully worked with this mortgage broker in the past get references.
Pat


#7

Re: Refi owner occupant mortg. after 2 weeks - Posted by Paul Macdonald

Posted by Paul Macdonald on November 08, 1998 at 22:17:14:

Legal? Yep. Smart, maybe. How soon is your l/o client planning on doing the purchase? Financing 2 loan closings and selling within a year would be pretty darn expensive. It would eat up a good portion of your cash out and total profits… unless the refi was at a low enough interest rate you’d save in the long and short run.

What 60 day rule? The old guidelines suggest first 12 months at purchase price or appraised value, whichever is less…

Nowadays they are a lot more liberal (ok, so once in a while, very occasionally, I like liberals) than they used to be. Fannie and Freddie both allow 80% LTV cash outs within the first 12 months with “liberal” guidelines. But there are alot of possible reasons why you could be turned down.

So before you go counting them chickens, have your broker get you a binding loan approval from the second lender. That way you KNOW you assets are covered!

Good hunting.

PJM


#8

Re: Refi owner occupant mortg. after 2 weeks - Posted by JohnBoy

Posted by JohnBoy on November 09, 1998 at 10:55:43:

If you refinance the property usually with-in 6 months, any points paid by the lender on the back end of the loan to the broker would have to be paid back to the lender by the broker. Make sure the broker doesn’t charge you any points or fees on the front end of the first loan. This way the broker won’t make any money unless you get the refi done. You should still get a loan commitment for the refi from the second lender before you close on the first loan.

What lender is the broker using for the first loan? I’d like to know what lender doesn’t require you to sign a paper stating whether you will be occupying the property or not?? Exspecially on a loan that IS for an owner occupied.

As far as signing that you intend to occupy with-in 60 days, as long as you refi and pay that loan off with-in that 60 days you shouldn’t have a problem. The problem would occur if you couldn’t get the refi done and got stuck keeping the owner occ. loan on the property. This is why you need a commitment from the second lender BEFORE you close on the first loan.


#9

Re: Refi owner occupant mortg. after 2 weeks - Posted by Paul Macdonald

Posted by Paul Macdonald on November 09, 1998 at 08:04:00:

Just wondering how you pulled the numbers of 7K to 9K in closing costs out of the air? Without knowing the loan amount and points plus the fact the first loan is going to be nonconforming. And with a non-conforming niche player you’ll immediately add costs and fees not associated with Fannie/Freddie deals.

If this is a 200K nonconforming purchase kicking over to a conforming note with two to three points it could be a heck of alot more costly…