Home Equity Line of credit underwriting turned down TWICE (loan, heloc, approval)
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First BOA and now Wells Fargo. But please read the history.
Both loans were fully anticipated to go to closing. In 2008 we purchased a home for cash for $310,000 in my daughter's name, but the home was ours. Last year we added ourselves to the deed. I spelled all this out to BOA and they said it didn't matter. Loan processing was a snap and got to the underwriter who rejected it the deed had only been in our name for 3 months.
Fast forward to Wells Fargo. Went to local branch and explained the entire title scenario. Local branch rep contacted the main lending headquarters. We were told as long as the title and deed was in our name for 6 months, it should be fine.
Facts:
We own the home free and clear.
Credit scores of 775 and 766
We have an income of $82,000 per year
debts run $45,000 with auto and student loans, $20,000 in credit card debts.
We to pay off $35,000 of those debts at closing.
Everything was pre approved and again we sped through the initial process.
Processors contacts me asking for explanation about credit card usage. Wrote a letter. She said title had cleared. All would be fine.
Next day she contacts me with the same questions about the title BOA had. They were freaked out that the home was originally purchased by my daughter (our funds and our home, just legally in her name) and then we were added to the deed. I explained we had done this due to travels and assurance that if anything happened to us, she would own the home.
Processors contacts me a week later and said underwriter was reviewing my letters. Day after that, rejected due to the title switches????
We did exactly what they asked, told them about the title upfront, NOBODY listened I guess. We were told we would be closing in two days and then nothing for three weeks while they came to this decision?
The home is owned free and clean, no liens, we have minimal debts and A credit ratings. We were seeking $70,000 HELOC on a home appraised at $342,000?!?!?
Everywhere these days wants 6 months on title. Your explanation sounds like you used a straw buyer to buy the home. Usually when a straw buyer is utilized, it's to avoid a penalty or to take advantage of something the real buyer cannot, like homestead exemptions (reduced taxes). I am not saying that is the case here, but it's quite possible something spooked the bank as suspicious (which then would have triggered a SAR http://en.wikipedia.org/wiki/Suspici...eport_(banking) And, you'll never know if that is what triggered it........it's against the law to disclose to the subject a report has been filed.
Everywhere these days wants 6 months on title. Your explanation sounds like you used a straw buyer to buy the home. Usually when a straw buyer is utilized, it's to avoid a penalty or to take advantage of something the real buyer cannot, like homestead exemptions (reduced taxes). I am not saying that is the case here, but it's quite possible something spooked the bank as suspicious (which then would have triggered a SAR http://en.wikipedia.org/wiki/Suspici...eport_(banking) And, you'll never know if that is what triggered it........it's against the law to disclose to the subject a report has been filed.
We got no exemptions, no benefit of any kind whatsoever from originally purchasing the home in our daughter's name. Your assumption is ridiculous. People put their homes in their kids names all the time. She could have qualified for a tax credit, technically being a first time home buyer, but we didn't opt for it. Why? Because it seemed unethical to me. The reason was simple, we traveled and wanted the home immediately left to our only sibling if something happened to us.
We ran all this by the bank prior to applying for the loan and they said it would not be a problem. I think banks are being overly cautious these days. In my humble opinion, we are the perfect customer for this type of loan. I can say, the banks, their systems for applying and follow up are so flawed. Nobody seems to communicate with anyone.
As for a SAR, well, I read up on it. They can check me out all they want. We did nothing wrong. Buying a home for your child, or in your child's name is not a crime.
What do banks want these days? They don't want to see straw purchases which is what you did. Your explanation for doing that doesn't make sense. You can buy a home if traveling- or if it's so important to get that house- ---just come home. Making sure the daughter gets the house- just buy it in your name and set up a will or trust leaving it to her.
You've got red flags flying all over the place. You have tremendous debt- you make $ 82,000 a year but your debts total $ 65,000, including $ 20,000 on credit cards. Yikes ! On top of that you want a line of credit for $ 70,000. No, the bank does not believe you that you'll pay off $35,000 of it at closing. Things that may happen in the future do not concern banks. They are looking only at past performance and current status.
You've had the house in your name for only several months and what's the first thing you do- you seek to borrow money against it. Basically, you've had two banks look at this and neither likes what they see.
Sit on that house for a couple/ few years. Pay down as much of that debt as you can using your own dimes. Then try again for a loan. It should go easier next time.
What do banks want these days? They don't want to see straw purchases which is what you did. Your explanation for doing that doesn't make sense. You can buy a home if traveling- or if it's so important to get that house- ---just come home. Making sure the daughter gets the house- just buy it in your name and set up a will or trust leaving it to her.
You've got red flags flying all over the place. You have tremendous debt- you make $ 82,000 a year but your debts total $ 65,000, including $ 20,000 on credit cards. Yikes ! On top of that you want a line of credit for $ 70,000. No, the bank does not believe you that you'll pay off $35,000 of it at closing. Things that may happen in the future do not concern banks. They are looking only at past performance and current status.
You've had the house in your name for only several months and what's the first thing you do- you seek to borrow money against it. Basically, you've had two banks look at this and neither likes what they see.
Sit on that house for a couple/ few years. Pay down as much of that debt as you can using your own dimes. Then try again for a loan. It should go easier next time.
A straw buyer by definition is to commit fraud, or hide something, or what past bankers did to get loans through for people who did not exist. A 55 year old father of a child, who saved his $ for over 18 years to pay cash for the home, who purchases the home in his daughter's name, who reaped no benefit for that purchase, does not quantify as a "straw" buyer.
My debt is $45,000 not $65,000. And the bank can draw up the closing documents to reflect debts being paid off upon closing. It's done all the time.
I agree, that maybe the title switches did create a "red flag" my original point was, WE SAT DOWN WITH THE BANK AND SPELLED IT OUT FOR THEM IN DETAIL! The idiots need to quit giving bad advise to THEIR CUSTOMERS.
At least this time, they wasted their own time and $ and not mine.
We got no exemptions, no benefit of any kind whatsoever from originally purchasing the home in our daughter's name. Your assumption is ridiculous. People put their homes in their kids names all the time. She could have qualified for a tax credit, technically being a first time home buyer, but we didn't opt for it. Why? Because it seemed unethical to me. The reason was simple, we traveled and wanted the home immediately left to our only sibling if something happened to us.
I read everything you wrote and I still don't see why you bought the house in your daughter's name. In fact, I don't see it at all. How on earth would doing so cause the house to fall to your sibling in the event of your demise? And wouldn't your daughter inherit by right even if you were foolish enough to die intestate?
Anyway, this is what wills are for, as noted above. It sounds very fishy, you do have red flags galore, and your hostile response to some very helpful replies here raise even more. FWIW, I'm glad that some banks, somewhere, are actually taking some care with their real-estate loans nowadays.
Siblings was a typo. I meant my child. Anyhow, I wrote a letter of explanation and the loan was just approved today by another credit union. I also failed to mention this was a second home, hence the reason we put her on the title and the reason she remains on it.
I still maintain there is nothing "fishy" about purchasing a home in your child's name.
I have a few doctor friends and attorneys in the family in Florida who have all done the same. It offers protection against potential litigation. A will is fine and dandy, but adding three people to a deed offers far superior protection in the event you're ever sued. And we all know we reside in a sue happy country. By having my daughter on the deed, all three parties are considered free standing, meaning a suit would have to involve all three persons on the title.
Something many of you here are obviously not aware of. If also offers the bank more protection too. Something the local loan processer here, who is highly educated in his line of work, unlike BOA and Well's Fargo. If you are in a profession that places you at potential risk for being sued (which now a days is just about anything) having your child on the deed or title offers you superior protection in 32 states.
If you are in a profession that places you at potential risk for being sued (which now a days is just about anything) having your child on the deed or title offers you superior protection in 32 states.
Well, it does and it doesnt.
Consider what would happen if you add your daughter your house deed and she then divorces or dies. In the case of divorce, her husband could claim an interest in your home as an asset she owned during the marriage. He might not prevail since the home was a separate gift and might not be considered a "marital asset." But thejudge might consider that since she has that substantial asset in hername, the other property should be divided favorably to your son-in-law. The court could force you to sell the house (partition the property) or you would have to buy him out. Or suppose your daughter dies leaving everything to her husband. He then remarries. Your home is owned by virtual strangers. You still have to worry about their creditors, divorce, and so on.
You may loose homestead exemptions if your child is on the deed but does not live in the house. This can affect tax breaks and bankruptcy.
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