A SIGH OF RELIEF

Part One

Yesterday, I breathed a sigh of relief. A loan transaction I had been working on for quite a while finally was approved. Here’s the story.

My client had inherited her late father’s house together with her sister. She wanted to keep the house and live there, while her sister wanted to sell it and divide the proceeds. It sounds simple, doesn’t it? It wasn’t. It took three attorneys, two appraisers, a real estate agent, and a judge to determine the amount that had to be paid to settle the matter. And then I came into the picture.

My client was working, but she did not have enough reported income to qualify for a conventional mortgage. She also had not filed her tax returns. Yet she needed a substantial amount of money to keep her father’s house and settle the matter with her sister. Where could we find the money?

I started by looking at her current home in Southern California, where she was living. There was only a small mortgage on that property. But there was a problem. To access the equity through the financing option I was considering, she needed to establish the inherited property as her new residence.

That meant moving out of her current home, finding a tenant, and establishing her new residence at her late father’s house. We needed to document the change with the appropriate records, including her driver’s license, bank statements, and bills.

There was another complication: the backyard at the house in Southern California was undergoing major repairs. We had to wait until the work was completed before moving forward with the next steps.

First, I found an experienced lender offering a good interest rate. We planned to use a special loan program designed for investment properties. Instead of relying on the borrower’s personal income, this type of program can qualify a loan primarily on the property’s rental income, subject to the lender’s requirements. The rental income could be supported by a special report prepared by the appraiser. The borrower also needed to demonstrate that she had sufficient reserves. We thought we were on our way.

Then the appraisal came. The appraised value was too low, which meant we could not obtain the amount of money my client needed. I reviewed the report with the lender, and we discovered several mistakes.

Fortunately, I was working with an experienced lender who knew how to handle the situation. The lender was able to order another appraisal, and the new report eventually provided the value we needed. One problem solved.

Then came the preliminary title report. It showed an old loan that supposedly remained unpaid, even though it had been paid off about 25 years earlier. Fortunately, the person associated with that old obligation was still alive and could confirm that there was no outstanding debt. But we weren’t finished.

The title report also showed tax liens dating back to an earlier period. Time was running short, so my client agreed to pay them off from the proceeds of the new loan and deal with the government afterward. Step by step, we worked through the obstacles.

Finally, the loan closed. My client had the money in her bank account to settle the matter and move forward with her life. But when we looked at the bigger picture, something else became clear. We had accomplished what she needed to do, but the financial consequences were substantial.

That is where I will leave you until next week. In Part Two, I’ll tell you more about what happened and what this transaction taught me about the mortgage business.

With more than 40 years of running my mortgage brokerage practice, I have learned that closing a loan is sometimes much more than just finding the right lender. It requires patience, experience, persistence, and the ability to solve one problem after another. And sometimes, when the loan finally closes, the biggest feeling isn’t excitement. It’s relief.

Meanwhile, if you know someone who might benefit from my mortgage services, please don’t hesitate to share my information with them.

Thank you!

Manny Kagan
Mortgage Broker | 40+ Years of Experience
(415) 225-7920