Margie called me to help her with the refinance of a home she lived in her entire life. In 1965, when her parents originally bought the house, her father wasn’t yet legal in this country, so her mother and her aunt (her mother’s sister) bought the house together. Margie, her brother Joel and their parents lived in the house together. Eventually, Margie’s parents paid off the mortgage in full. Then Margie’s father died.
After his death, Margie’s Aunt moved in with them. She was old and sickly. Margie’s mother took care of all her needs. As Margie’s mother’s health began to fail, Margie took care of both of them.
Her brother Joel was married with a wife and family of his own, and lived out of state.
Margie parents wanted their home to be inherited by their children. It was understood that Margie would get the house because she had selflessly taken care of her aunt and then her mother, until her mother eventually passed away. Her brother had agreed to this.
New York State did not agree. It seems that Margie’s parents never changed the deed of the house. The owners were Margie’s mother and aunt. Because there was no will, the laws of the state dictated who would inherit Margie’s childhood home. The fact that her parents solely paid the mortgage, taxes and upkeep was immaterial.
Margie’s home had been owned by her mother and Margie’s aunt, Margie and her brother both inherited her mother’s portion of the house. Since Margie’s aunt never married, her siblings inherited her portion. There were four siblings in total, Margie’s Mother and two uncles. All the siblings inherited one third of the aunt’s portion. To make matters more complicated, all the siblings were already dead. Therefore their children, Margie’s cousins, who were virtual strangers and had never visited with Margie’s aunt or helped with her care before she passed away, owned part of her childhood home. And they wanted their share.
In total, there were actually 17 heirs to the aunt’s portion of Margie’s home.
We completed a $210,000 refinance, which was what the courts had deemed the other heirs’ portion of the home. Margie did not have great credit and her income was limited. Her brother had to co-sign for the loan.
What a mess.
The lesson: When purchasing a home for another, or with another person, have a serious discussion with your Attorney regarding the type of ownership. Will you hold title as “Tenants of the Entirety” (only for married folk, where if one passes away, the remaining spouse automatically inherits the others interest in the home), “Tenants in Common”, (where different people own the same or different percentage of ownership in a property, and when any of the parties passes away, their interest is passed on to their heirs or according tom the terms of their will) or “Joint Tenants with Rights of Survivorship” (similar to a married couple, in that the ownership percentage is equal, and when one party passes away, their ownership interest reverts to the other owner automatically).
If you have any questions regarding any mortgage issue, contact Ann Zeilingold, Branch Manager of First Meridian Mortgage Corp. Licensed Mortgage Banker NY, NJ, CT, banking departments. 1609 Route 202, Pomona NY 10970. 845-354-9700 or ann@annzeilingold.com or www.annzeilingold.com.
The mortgage process is an extremely tedious and detailed process. Some first time homebuyers don’t realize that their normal day-to-day actions regarding their employment and bank activity can cause undue stress when applying for a mortgage.
Some examples:
Large deposits: Every deposit into your bank accounts is questioned. You have to be prepared to explain any cash deposits or any unusual deposits into your accounts. I recall a conversation with an elderly, first-time home buyer client. This client was putting $150,000 down on a new home in Monsey. This occurred a few months ago and went as follows:
Ann: Mr.Smith, your bank accounts total $90,000 and you need an additional $60,000. Where is that money coming from?
Mr. Smith: I am 79 years old and I am a man of my word. If I tell you that I have $150,000, then I have $150,000. I will bring the money to the closing.
Ann: Mr. Smith, I have to show the under-writer that you have enough money to complete the purchase.
Mr. Smith: My daughter will be giving the money to me.
Ann: She will need to sign a gift letter and prove source of funds and the transfer of funds.
Mr. Smith: That is utterly ridiculous. My daughter will not give you a copy of her bank statement. That is none of your business. If my daughter wants to give me money, it’s between her and me.
And so it went…
Large deposits are defined as anything over normal pay stub deposits. Sometimes we have to explain deposits as low as $500!
Cash money usually cannot be documented and money coming from employers or congregations also is not acceptable. Before purchasing a home, this is a discussion that you MUST have with your Mortgage Specialist.
A few common mistakes regarding income:
When applying for a mortgage, work a complete week. If you get paid hourly, we will look at your pay-stubs and the verification of employment from your job to calculate your income. Over the Yomim Tovim this is a big problem. Applicants that work in schools or work by the hour suddenly have very short work weeks. It is important to provide paystubs covering a one month period showing a consistent hourly average. Therefore, a savvy mortgage consultant will advise you as to what to do and how to plan your contract dates so that a complete month of complete paystubs can be provided.
Another common mistake is that people start a new job and get paid with a 1099, meaning that the taxes are not taken out. Technically, you are an independent consultant. You need be working two years on a 1099, and have at least one filed tax return to verify the income prior to being able to use ANY of this income.
Just recently, I was asked by a realtor to try to salvage a deal. The client had been in contract for three months and had just gotten turned down. The client gave me his tax return. When I asked for paystubs, he told me he started a new job five months before. When I saw his paystub, I saw that he was being paid with a 1099. I had to tell him that even though he had filed a tax return last year, and he had already made a substantial amount from his new job, that I could not consider ANY of his income for mortgage purposes!
Being a first time homeowner is daunting. Don’t expect the mortgage process to be easy. You must choose a competent mortgage professional to guide you and they must ask you a lot of questions. Only then will you get the guidance that you need to reach the finish line, your closing!
If you have any questions regarding any mortgage issue, contact Ann Zeilingold, Branch Manager of First Meridian Mortgage Corp. Licensed Mortgage Banker NY, NJ, CT, banking departments. 1609 Route 202, Pomona NY 10970. 845-354-9700 or ann@annzeilingold.com or www.annzeilingold.com.
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