The mysterious $10k jump....

[Jina]

What is the name of your state? IN

My boyfriend and I decided to buy a home for our growing family. We started looking and saw an ad for a business that builds homes for low-income families. We called and the next day a Mortgage broker called us, and wanted to show us some homes. After looking at the two different kinds -- by two different builders -- we decided on the home we liked after some discussion that night. She told us that we were approved for either home, the payments starting at $660 a month. The house that we really liked also happened to have a grant attached to it, attached before we had even called the office. We also had a Realty book that we had picked up to look at houses, and in it was an ad for that very home -- $119,000. She told us that the Loan would be for $129,000. We called her, and asked her why we were offered to be sold the home for $10,000 more than the ad had said. She told us that the reason it was hiked up was because she had to pay for points to bring down my interest rate, and also because she had to pay to get the grant. (This grant BTW, is something that ties to the home-owner as long as the owner lives in the home. All Federal Income taxes on the home owner's paycheck is not taken out of the paycheck - it is payed by the Grant. Therefore shows as if we had already payed them and we do not have to make that up to the government... or at least how it was explained.) She also said the ten grand was a percentage here and a percentage there - for things i'm not sure what they were but she was not good at explaining them, and seemed to side step a little bit saying things like, "I know you don't know me from Adam, but I would not lie to you."

She told us that if we signed the Purchase Agreement to get a loan started for the home that we could revoke the agreement if we did not like something about the loan. We had her send the loan application to us via e-mail so we could look it over and get some advice from our relatives, but they seem almost as confused as we are. Some of the things in the loan paperwork do not make sense. She said the Builder's were paying for our closing costs and down payment. She said she had to basically pay $10,000 to get our home for what we are getting it for, and we have to pay for that. Maybe in the long run it saves us money, and maybe she had to do something to get a loan that goes from 4.88% interest the first year, 5.5% the second and then 6.5% the third year, and remaining there. I guess I just am not sure if I am getting a loan for this home and $10,000 in her pocket for doing this work (and in this case feeding me a line of BS) or if it is legit.

Has anyone heard of anything like this? I'm not sure how all this works, can anyone explain any of this to me? (sorry if i am confusing at all... i can't say that i'm not confused -- let alone the amount of information that has been thrown at me the last day or two, and none of it in writing to help me keep it straight.)

Please help me!

[IndianaOwner]

If you are confused and do not understand everything, then if I were you I would not go forward. Please note a fact about real estate, people will sell if for whatever you are willing to buy it for, there is no "set" price. Why not dump the deal with this group and just buy directly from the builder/seller? I bet you can get it for less than the $119K too.

The "creative" financing arrangement sounds like a scam...

[IndianaOwner]

Also, where are you in Indiana and who is the builder? Just curious if you want to share.

[Buk1000]

Predatory lending is part of what goes on with too many instances of people using the builder's lender or getting roped into these various incentives, down payment assistance, etc. A seller is not supposed to be contributing to the down payment, (RESPA law/rule but I don't have a link handy.) Try the HUD website, hud.gov. IMO if you gave them money you will probably have to hire an attorney to get it back, and you might not get it back. Also, IMO, unless you are very savvy about both construction and financing, don't even deal with builders right now. Too many of the production builders especially are using some questionable lending practices to sell homes to buyers who don't really understand what they are signing or getting into. Then they will blame you, the buyer, for allowing it.

[url]www.mortgagefraudblog.com/index.php/weblog/permalink/kansas_builder_charged_in_charged_with_25_million_bank_fraud_scheme/[/url] See if this scheme is like yours

[url]www.hadd.com/foreclosure.pdf[/url] This is a PDF, may be similar to your case too.

[Jina]

Originally Posted by IndianaOwner

Also, where are you in Indiana and who is the builder? Just curious if you want to share.

I am in a small town in Northeast Indiana. The builders name is Homestead Homes. I'm sure the homes itself is a honest product, But I have a feeling the Mortgage lady is setting us up to fail.

We circled everything that did not seem right to us on our copy of the contract, and he is talking to her now as I write this. He asked her how the price of the home was up to $129,000 and she keeps saying the MCC and other fees are included in that extra $10,000 and it is clearly written on the contract that those are added on TOP of the $129,000 and is payed by the seller, dropping the price back to the $129,000.

My boyfriend is also waiting on a call from a Real Estate Attorney, who should be in the office anytime... Mainly because what she has down for our income for a year looks a little on the high side... and says that we get $200 a month from unemployment/welfare... and mine figures to be averaged on 40 hours a week -- not the 65 hours every TWO weeks that we told her I get.

I just hope this doesn't end up making us unable to get a home in the future, or ruin things for our 2 month old little girl. We are only trying to provide!!!

I'm so sick of the fuzzy numbers ><

Oh and we have not given her any money... We just filed our taxes and thought that we should call around so we could use the money for getting a good stable home established for our daughter, because we live with our parents. We haven't even gotten the tax returns in the mail yet! I never thought we would be pushed to get this far in a whole 3 days... She called us this morning and first question was, "when can we get together to sign the loan?" and my boyfriend said we weren't ready to sign yet.

Something else now, she is stating that our payments will never go above $750 a month... but we just do not see how that is possible when at 4.88% we would pay $657. In three years we will be at 6.58% (i believe she said) and everything i have done tells me the payments would be reaching over $800.

Here is to waiting for a lawyer to call.... Cheers...

[LindaP777]

Originally Posted by Jina

My boyfriend and I decided to buy a home !

bad idea . . .

Originally Posted by Jina

for our growing family!

huh-oh!

Originally Posted by Jina

She told us that the reason it was hiked up was because she had to pay for points to bring down my interest rate

This is very possible. You would be getting a loan for 110% of the property. The additional $10,000 would cover your buy downs (points) and closing costs.

But, here's where I see the problem . . . I'm sure this is not s fixed interest rate, but adjustable, right? Your payments now would be $660, but how much will they be when the rate jumps? Can you afford that? ALSO, check out what the current PROPERTY TAXES are (they might be escrowed into the loan). Those current property taxes are on an EMPTY LOT if the house was just built (or not built yet). The property taxes will also take a significant jump when taxes on the completed house. Builders often don't tell you that. They just tell you how "low" your payment will be to sell you the house. Factor in both higher interest rates and higher property taxes to get a better idea if you can afford this house.

[tranquility]

One of the worst things people do in business is try to appear smarter than they are. I'm an OK smart guy who has some experience and training in business and property and when someone starts talking fast, I play dumb. I ask them to slow down because I can't understand everything they're saying. Depending on the situation, I then usually tell a self-depreciating joke and then tell them how I wish I was as smart about these matters as he is. When they start talking a little slower, I start writing down the meaning of what they say and then clarify what I wrote down by asking if I am correct in my understanding. If they're still being a little vague, I ask where I'm going to find what we're talking about in the papers we eventually sign. I write that down while repeating it out loud. Sometimes I'll write it down slow, trying to give the impression that writing is hard for me. Try it. As others have said, don't agree to or sign anything you don't understand.

That being said, The Grant smells funny. A lot of things smell funny here. I can't know unless I could look at everything. (Even then, maybe not. I'm not the sharpest tool in the shed and the salesman seems like shiney brand new knife.)[See how it works?]

I would be exceptionally careful as there are many things in life far easier to get into than to get out of.

[Gadfly]

Like everyone else is telling you, some of what you are saying is ok, some of what you are saying sounds like out right fraud and some of what you are saying sounds like you don't understand.

A home is a huge investment. Before you get yourselves into something that could ruin you forever, get out of the deal, go to the book store and buy some books on home purchashing, or go to a community college class on home finance.

Don't get me started on the whole "family" thing with your boy friend. The two terms do not go together.

[Jina]

I think our ML and REA are in Cahoots. Mysterious $10k in our loan they won't tell us exactly what it is for... why wouldn't they be able to show us exactly what it is?

We are setting up an appointment with the Real Estate Attorney -- as soon as he calls us back -- our ML said that since we did not like the loan we got, she was going to try another loan. Then she said that since my boyfriend was good friends with his employer (it's a family based business he's been with for 10 years) that he should try to get them to lie about his income, and say it is less than it really is to drop his payments down. That just SCREAMS loan fraud.

And for those who are concerned, Maybe I should have said he was my husband even though we are not married. Neither of us are strong believers in the 'institution' of marriage, for we have seen too many people close to us get married and divorced. Either you are together or you are not, and so far, we get back more together unmarried in taxes than we would if we were married. We have a child together, and we live as if we are married. Why fix something that isn't broken? I understand 'beliefs' that people have, trust me, I was raised catholic. I was also taught that you should not judge others.

The situation at hand does not have anything to do with whether or not we are married with child. If anything, because he is Lawfully single, he could get assistance easier to get a home cheaper because my income would not have to be included since it isn't much anyways... Which was something we were about to suggest when she suggested his employer should lie about his pay.

It seemed like such a good deal 3 days ago... and now the only thing becoming more clear is the obvious. Fraud.

[LindaP777]

Originally Posted by Jina

Then she said that since my boyfriend was good friends with his employer (it's a family based business he's been with for 10 years) that he should try to get them to lie about his income, and say it is less than it really is to drop his payments down. That just SCREAMS loan fraud.

Ya think???

Originally Posted by Jina

And for those who are concerned, Maybe I should have said he was my husband even though we are not married. Neither of us are strong believers in the 'institution' of marriage, for we have seen too many people close to us get married and divorced. Either you are together or you are not, and so far, we get back more together unmarried in taxes than we would if we were married. We have a child together, and we live as if we are married. Why fix something that isn't broken? I understand 'beliefs' that people have, trust me, I was raised catholic. I was also taught that you should not judge others. .

I was looking at it from a more business aspect, not religious. If you break up, who gets the house. Due a search on this site and see the answer, but I don't think you'll like it very much.

Originally Posted by Jina

... and now the only thing becoming more clear is the obvious. Fraud.

It may not be fraud, but definitely designed for the benefit of the seller and not the buyer.

[tranquility]

And for those who are concerned, Maybe I should have said he was my husband even though we are not married.

There is an enourmous legal difference between those who are married and those who are not. While you may feel there is a moral judgment being made, in reality it is seeing the incredible difficulties which may occur when unmarried people buy property together. For a quick example, search for fiance and house on the forum.

[Mister Darcy]

Originally Posted by Jina

Something else now, she is stating that our payments will never go above $750 a month... but we just do not see how that is possible when at 4.88% we would pay $657. In three years we will be at 6.58% (i believe she said) and everything i have done tells me the payments would be reaching over $800.

Just drop this loan and walk away. Assuming that the above quote is correct, it means that you will be paying interest only and nothing towards the principal balance. Maybe, not even meeting all of the interest and actually increasing the principal over time.

Plus, while it is possible to buy a home with your boyfriend, you both should have a written agreement on what happens if the two of you ever separate.

[Paddy Reagan]

(This grant BTW, is something that ties to the home-owner as long as the owner lives in the home. All Federal Income taxes on the home owner's paycheck is not taken out of the paycheck - it is payed by the Grant. Therefore shows as if we had already payed them and we do not have to make that up to the government... or at least how it was explained.)

All of this talk about a "grant" suggests that this loan (or a portion of it) is being subsidized. Before you move forward, ask for the identity of the organization that offers the subsidy. Contact them directly and ask for information about the program, its requirements and the fees/points/etc. that must be paid by the buyer.

Organizations which support such programs are interested in helping deserving families obtain affordable housing. In doing so, they work hard to avoid excessive fees that reduce the net benefit to the buyer.

[Jina]

We picked up all of the paperwork (taxes and such) and no longer are persuing the property. We explained to the Real Estate agent what was going on and what our lawyer had said and she was more than happy to revoke anything that was signed. Not more than an hour later the ML called us nd told us that we 'misunderstood' what she was wanting him to do concerning his employers. She said she only wanted his work to 'answer the questions correctly' -- as opposed to honestly? She had his W-2's from the past years, so I don't know what exactly she was going for there.

Anyhow, it's all over.


Thank you for all the advice

(BTW, talking to another agent, and they have houses that the payments are less on -- without the mysterious Grant... We're taking a week or so off from looking to get our heads straight and research... then try again.)

[Mister Darcy]

Originally Posted by Jina

We picked up all of the paperwork (taxes and such) and no longer are persuing the property. We explained to the Real Estate agent what was going on and what our lawyer had said and she was more than happy to revoke anything that was signed. Not more than an hour later the ML called us nd told us that we 'misunderstood' what she was wanting him to do concerning his employers. She said she only wanted his work to 'answer the questions correctly' -- as opposed to honestly? She had his W-2's from the past years, so I don't know what exactly she was going for there.

Anyhow, it's all over.


Thank you for all the advice

(BTW, talking to another agent, and they have houses that the payments are less on -- without the mysterious Grant... We're taking a week or so off from looking to get our heads straight and research... then try again.)

Just remember that there are a lot of predatory lenders out there. Get a good lawyer to help you with the closing and to review all of the paperwork. It's worth the investment.