What is the name of your state? Maryland
Okay here is the story...
Selling our house-
Me and my fiance get married next month. A few months back, we decided to sell the townhouse we have had for two years, cash in on the equity, and move into a new bigger house. Turns out, her sister just got a decent job, and can afford to buy the townhouse from us. We owe $128,000 on the townhouse, and it appriased for $200,000. We are selling it to her sister for $190,000, which is a fair deal. When it is all said and done, we end up with $60,000. Her sister has a contract on the townhouse, and we can settle pretty much any day. I know the mortage person, and he is letting us pretty much pick whenever,
Finding a New House-
We originally intended to move to southern MD. I contacted the above mentioned mortage person, and he approved us $350,000 on an 80-15-5 loan. The allowed us to take left over cash, and pay off a car, and some other little debt. We talked about an 80-20 loan, but the mortage guy said that there are much stricter regulations with that as far as cash on hand and debt ratio.
We were looking in southern MD, but then we found a development up our way built by Ryland Homes. We decided to talk to them, since home gain value quick in this area, and if we bought a house up here, we could have it for 2-5 years, cash in on the investment, and get something we really want. Housing prices are crazy in this area.
We spoke with the sales person, and went over our credit and explained what we were looking to do. She suggested we go with an 80-20 ARM loan with intreast only and a fixed intrest rate for five years both loans. We told her that our mortgage person could not approve us for that type of loan. She looked over our stuff, and told us Ryland Mortage should not have any issue with it because they are a huge lender and all. Plus we would pretty much have to use Ryland Mortgage because there were about $40,000 in free options tied to it. She even said that Ryland could likely approve us for much more than the other company too.
Me and my fiance talked, and we liked the scenerio because it essentially allowed us to take our money from the other house and pay all our debt off, plus have a nice nest egg.
We priced out a house that had all we wanted, and it costs $389,000. The salesperson worked up our payment on the 80-20 fixed five year ARMs, and came back witha payment that we could afford. She also took it to Ryland's loan officer for review, and she said everything looked fine.
Based on this, we put a contact on the house. It was a contract contingent upon us selling our house. A few days later, the loan officer contacted us, and we discussed a few things...she said everything looked "favorable". They FedExed us a Good Faith Estimate, and we looked it over signed it. The payment was like $100 higher than expected, but no big deal. We assumed it had been what we had discussed all along.
Two weeks ago, I was looking over the Good Faith Estimate with my mortage friend (first time we could get togethor) and he said something looked odd. The intrest rate on the 80% loan, which was 6.35% seemed high. The second 20% loan was at 4.25% which was exceptionally low. He recommended I call them up about the first loan's rate for sure.
I called my loan officer up, and she said the first rate was high because it was 100% financing. She said we could buy it down a few points, which was not too expensive. Somehere in there she mentioned that the 4.25% rate was a "special" rate. At the time, I was more concerned about the first rate, so I left it at that.
The next day, I thought about it, and decided I should ask her about the 4.25% "special rate", since most second mortgage loans are in the 6.5-8% range.
After some proding, she finally admited that the second loan was a Home Equity Line of Credit (HELOC). For the first 3 months the rate was locked at 4.25%, then afterwards it becomes PRIME RATE+3.35%. So essentially, in three months our payment would go up hundred's of dollars!
I got angry with her because we had been told all along the second loan was an ARM fixed for 5 years. Now they had changed it to this HELOC without telling us, which even at the 4.25% rate, had a payment higher than we signed the contract thinking it would be. And in 3 montsh when the HELOC became prime+3.35%, we simply could not afford the house. She said there were other options but each time, they were all hundreds of dollars more expensive because the intrest rate on second loan is normally much higher than the 4.25% rate they were figuring our payment at. Even the original 80-20 fixed ARM we wanted was hundreds more. She suggested than we get the second loan from another lender. In closiing she let us know the underwriting had approved the 80-20 HELOC loan.
Basically they used the "special" HELOC rate to get us approved for more house than we could afford, and mislead us the whole way.
I called my mortgage friend and he said there is no way I can get a second loan from an outside company because the house is too much for us to afford. He also said that he could see how we did not catch it it in the Good Faith Estimate, because there is no mention of a margin, or what the margin is.
If I had not questioned this farther, the HELOC would have been a financial disaster. Seeing as how Ryland mislead us, and we could not afford the house, we had our buyers agent fax them a letter asking that we be released from the contract and our deposit be returned. Our buyers agent and attorney's said this should not be an issue, since the house has not been built and no work has been started, and the contract is contingent upon selling our house. Most builders send you on your way, and sell the house to the next person for more.
After the fax, the sales person called us back saying she didn't know what happened, and it looks like somehow the financing got switched. She claimed the main office was closed on Monday, and she would not know untill Tuesday.
Tuesday she called back and said that Ryland will not let us out the contract. Basically they want to continue running different scenerios (which are all hundreds of dollars more expensive) through underwriting untill we get approved for one. I told her we could not afford that, and she said if we get approved for it we have to buy the house. She said if they can not approve us under a scenerio, they will let us out the contract.
This makes no sense since we are already approved under the HELOC. Couldn't they make us take that if there are no other alternatives?
Every Lawyer I have talked to laughs at this because it is so unheard of...and they say there is no way a court would make us by the house...but Ryland is making it really difficult. Any suggestions on what to do with them?
Okay here is the story...
Selling our house-
Me and my fiance get married next month. A few months back, we decided to sell the townhouse we have had for two years, cash in on the equity, and move into a new bigger house. Turns out, her sister just got a decent job, and can afford to buy the townhouse from us. We owe $128,000 on the townhouse, and it appriased for $200,000. We are selling it to her sister for $190,000, which is a fair deal. When it is all said and done, we end up with $60,000. Her sister has a contract on the townhouse, and we can settle pretty much any day. I know the mortage person, and he is letting us pretty much pick whenever,
Finding a New House-
We originally intended to move to southern MD. I contacted the above mentioned mortage person, and he approved us $350,000 on an 80-15-5 loan. The allowed us to take left over cash, and pay off a car, and some other little debt. We talked about an 80-20 loan, but the mortage guy said that there are much stricter regulations with that as far as cash on hand and debt ratio.
We were looking in southern MD, but then we found a development up our way built by Ryland Homes. We decided to talk to them, since home gain value quick in this area, and if we bought a house up here, we could have it for 2-5 years, cash in on the investment, and get something we really want. Housing prices are crazy in this area.
We spoke with the sales person, and went over our credit and explained what we were looking to do. She suggested we go with an 80-20 ARM loan with intreast only and a fixed intrest rate for five years both loans. We told her that our mortgage person could not approve us for that type of loan. She looked over our stuff, and told us Ryland Mortage should not have any issue with it because they are a huge lender and all. Plus we would pretty much have to use Ryland Mortgage because there were about $40,000 in free options tied to it. She even said that Ryland could likely approve us for much more than the other company too.
Me and my fiance talked, and we liked the scenerio because it essentially allowed us to take our money from the other house and pay all our debt off, plus have a nice nest egg.
We priced out a house that had all we wanted, and it costs $389,000. The salesperson worked up our payment on the 80-20 fixed five year ARMs, and came back witha payment that we could afford. She also took it to Ryland's loan officer for review, and she said everything looked fine.
Based on this, we put a contact on the house. It was a contract contingent upon us selling our house. A few days later, the loan officer contacted us, and we discussed a few things...she said everything looked "favorable". They FedExed us a Good Faith Estimate, and we looked it over signed it. The payment was like $100 higher than expected, but no big deal. We assumed it had been what we had discussed all along.
Two weeks ago, I was looking over the Good Faith Estimate with my mortage friend (first time we could get togethor) and he said something looked odd. The intrest rate on the 80% loan, which was 6.35% seemed high. The second 20% loan was at 4.25% which was exceptionally low. He recommended I call them up about the first loan's rate for sure.
I called my loan officer up, and she said the first rate was high because it was 100% financing. She said we could buy it down a few points, which was not too expensive. Somehere in there she mentioned that the 4.25% rate was a "special" rate. At the time, I was more concerned about the first rate, so I left it at that.
The next day, I thought about it, and decided I should ask her about the 4.25% "special rate", since most second mortgage loans are in the 6.5-8% range.
After some proding, she finally admited that the second loan was a Home Equity Line of Credit (HELOC). For the first 3 months the rate was locked at 4.25%, then afterwards it becomes PRIME RATE+3.35%. So essentially, in three months our payment would go up hundred's of dollars!
I got angry with her because we had been told all along the second loan was an ARM fixed for 5 years. Now they had changed it to this HELOC without telling us, which even at the 4.25% rate, had a payment higher than we signed the contract thinking it would be. And in 3 montsh when the HELOC became prime+3.35%, we simply could not afford the house. She said there were other options but each time, they were all hundreds of dollars more expensive because the intrest rate on second loan is normally much higher than the 4.25% rate they were figuring our payment at. Even the original 80-20 fixed ARM we wanted was hundreds more. She suggested than we get the second loan from another lender. In closiing she let us know the underwriting had approved the 80-20 HELOC loan.
Basically they used the "special" HELOC rate to get us approved for more house than we could afford, and mislead us the whole way.
I called my mortgage friend and he said there is no way I can get a second loan from an outside company because the house is too much for us to afford. He also said that he could see how we did not catch it it in the Good Faith Estimate, because there is no mention of a margin, or what the margin is.
If I had not questioned this farther, the HELOC would have been a financial disaster. Seeing as how Ryland mislead us, and we could not afford the house, we had our buyers agent fax them a letter asking that we be released from the contract and our deposit be returned. Our buyers agent and attorney's said this should not be an issue, since the house has not been built and no work has been started, and the contract is contingent upon selling our house. Most builders send you on your way, and sell the house to the next person for more.
After the fax, the sales person called us back saying she didn't know what happened, and it looks like somehow the financing got switched. She claimed the main office was closed on Monday, and she would not know untill Tuesday.
Tuesday she called back and said that Ryland will not let us out the contract. Basically they want to continue running different scenerios (which are all hundreds of dollars more expensive) through underwriting untill we get approved for one. I told her we could not afford that, and she said if we get approved for it we have to buy the house. She said if they can not approve us under a scenerio, they will let us out the contract.
This makes no sense since we are already approved under the HELOC. Couldn't they make us take that if there are no other alternatives?
Every Lawyer I have talked to laughs at this because it is so unheard of...and they say there is no way a court would make us by the house...but Ryland is making it really difficult. Any suggestions on what to do with them?