Tricky loan scenarios- your inputs, views and ideas will be

ravik · Joined: 07 Sep 2007 Posts: 22 10.42 Dollars($)

I have 2 deals- a rate and term refi and purchase from the same family. Father and mother used to own a house worth $1.3million now.They still owe a balance of around $650000 on that property. In 2003 they bought a bigger house so they moved out and transferred the $1.3million property to her elder daughter using a quit claim. Their elder daughter has been making payments and staying in that house since then. But her credit report does show this mortgage. Now she wants to go for a rate and term refinance in her name and reduce her monthly payments.

Now the elder daughter owns a separate house which she bought but doesn't stay in that. Her sister lives in that house.Elder sister owes around $100,000 on that property. She wants to sell this property to her younger sister for a price which is equal to the balance she owes which is around $100,000.

Now i am confused as to how to structure this deal. Both have terrific credit scores. elder daughter has a mid score of 797 and haven't pulled her younger sisters credit.Good employment history..perfect credit history..

The problem with the younger sister buying the property from her elder sister will be a non arms length transaction and i am not sure which lenders will do it.

Also i confused as to which deal should i close first the purchase or the refinance.

Any inputs fom lenders, AE's and fellow brokers will be highly appreciated.

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bthahir · Joined: 05 Sep 2007 Posts: 36 13.22 Dollars($)

You have given a very interesting scenario. I would say this is pretty clean deal. Please start the refinance transaction early and make the borrower feel comfortable with you, Being a deal with good income and credit you can get this closed very soon so the borrower will have good harmony with you which will make her to give you enough time to complete the slightly tougher purchase transaction.

larry · Joined: 27 Jun 2007 Posts: 3328 473.40 Dollars($)

Hi Ravik,

I agree with bthahir that you can go for the refinance transaction first. Then you can consider the younger sister's "buying the property from her elder sister".

Why are you going for ARM? I think it is always better to go for FRM if she is thinking to stay for a longer period of time in the state.

Feel free to ask if you have any further questions.

Thanks,
Larry

livinginnky · Posted: Mon Feb 25, 2008 2:35 pm Post subject:

It only matters what order you do them in if the debt ratios are affected by the differences.

You are not doing anything sneaky with the sister to sister purchase. It would be just like any other sale... as long as the value is there.

The tricky part will be the first deal... Because of the value you still should be able to get it done. I think what needs to happen is the house needs to be resold to the daughter and a gift of equity can be done to make it just like a refinance but instead be a purchase. See what I mean. Not really tricky you are just going to need to do a gift of equity from the parents to the sister.

One extra consideration is the initial transaction of the quit claim. The parents lender may not be aware of the deed transfer... and may not allow it if they find out... That is why I think it would be easier for them to just take possession back and sell it to daughter again as a purchase.

Also if you are a LO, have you talked to your title company.... they may have some additional insights for your area.

lisascherzer · Joined: 04 Jan 2008 Posts: 599 69.58 Dollars($)

Just add them to title and refinance each. It doesnt matter in which order.

evolovik26 · Posted: Wed Feb 27, 2008 6:38 am Post subject:

If the older sister has been paying on the home since 2003 all you will need to show is 12 mon worth of payments on the home made from her account. Then its just like any refinance.
As far as the sister to sister purchase its perfectly fine and can easily be done. (should be done first if there is an issue with DTI )

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