Video Summary

Can I finance a home for my children?

That has been something that’s been done for many, many years. Parents want to help out their kids and they sometimes take out a mortgage on their house in order to give their kids financing and they secure it with a note and mortgage.  Sometimes they do it so that if the child is married to someone that they are concerned about they will make sure that, if there’s a divorce or anything like that, that they are still protected to get their money back or they can afford to give a gift to the child.  That is something that has been going on for as long as I’ve been practicing law.

However Congress has now passed what is called the Dodd-Frank Act and it is very comprehensive; it is over 1,000 pages of legislation, and it is designed to control financial institutions in consumer financing.  Under this bill, they say that you have to comply with a qualified mortgage, which is a 30 year mortgage and has all sorts of requirements under it and interest rates that you must comply with, if you are going to provide financing to a third party; which would include your children.  This does not make any sense.

This does not apply to sellers who are selling their property and then taking back a note in mortgage; that is called a purchased money mortgage, and sellers can do that once a year.  It also does not comply with if its investment property and not their home.

In answer to your question is if you do do the financing for your children and your mortgage does not comply with Dodd-Frank it is subject to various penalties and I don’t know whether or not they would ever have a defense if they choose to assert it as to the enforceability or the penalties in a foreclosure action if you attempted to foreclose a mortgage that does not comply with Dodd-Frank.

They made it extremely difficult and it does not make any sense whatsoever and would hope that if you are frustrated by this you might want to write to your congressman or senator and suggest that the amendment be made to Dodd-Frank which would allow family members to lend money to other family members and not be subject to the regulation and the law under Dodd-Frank.  That is a very long answer and however it is unfortunate.

If you have any other questions I’ll try and answer them; about Dodd-Frank and owner financing.

My phone number is 727-847-2288.

Video Summary

Why is my mortgage lender asking if my checking account and bank accounts have been seasoned?  This is all as result of the crash and the Dodd-Frank bill and that there’s any number of requirements now, the lenders to make sure there’s no fraud involved.  They want to make sure that this is your money and they want to know the source of it, so that someone just doesn’t lend you the money temporarily and you put it in your account a day or two before the closing to show that you have sufficient funds.  It’s getting more difficult to get a loan, and sometimes a gift of equity or a gift of the deposit, is something that’s going to be scrutinized by your lender.

So that is the reason for the lender to ask if your account has been seasoned.  They are checking on everything as a result of the oversight and the underwriting requirements after the real estate crash and all the problems involved and it’s to try and avoid any kind of fraud involved.  So going through and obtaining a mortgage now from a conventional lender is very time consuming and tedious mainly because of the additional regulations that have been imposed on the lenders in this particular market.

So if you have any questions about your loan and the closing process, well give me a call at 727-847-2288.

Video Summary

Does a FHA mortgage have more cost and requirements than a conventional loan?  There are no additional costs involved, as far as an FHA loan that a seller must bear as far as the closing is concerned.  In some instances they may require them to pay a $79.00 tax service fee, but other than that, there are no particular additional costs that must be borne by the seller if he sells to someone who’s getting an FHA loan.

FHA loans however do have a contingency that if the property does not appraise for the amount necessary to obtain the loan, then the deposit must be fully refunded.  So whenever you see that a buyer’s getting an FHA loan you really need to be concerned about the appraisal and the deposit needs to be fully refunded.

As far as the buyer is concerned they have to, of course, be credit worthy and they will have the additional cost since it’s a high cost loan so they charge for the insurance or the cost of the high priced loan in that you can get a 97% and possibly even higher percentage loan. That’s the primary increase in the closing cost, is the mortgage insurance if you will or what is charged by FHA for the high percentage loan to value which you may have to pay, continue to pay or there may be a lump sum amount in your monthly payments or there may be a lump sum amount in the front end of an FHA loan. But as far as the seller is concerned there are no additional costs. However, if there are any, it’s nominal; the same thing with the VA loan. I may have that confused at the $97.00 or $76.00 for a tax service fee, something that a seller has to pay.

So the biggest thing is whether or not the people will qualify money-wise and whether the property will appraise for the amount necessary to get a FHA loan.  So if you like to sell your house or need some help with financing or closing the transaction, well give me a call at 727-847-2288.