Q & A with Dottie Herman

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Q1 - I am the seller. What can I ask for from a buyer before contract, besides a pre-approval? Can I ask for the loan officer number or for a contact at the bank? Or, can my lawyer request that they have a commitment within 45 days or else the buyer will be liable for $5-10 thousand of their $80k down payment?

A - A pre-approval is only as good as the information that the buyer supplies to the loan officer, and how thoroughly the loan officer executed the process. You should by all means contact the bank and loan officer who issued the pre-approval and ask specific questions. Was credit pulled? Was the bank provided with complete income information (2 years of filed federal tax returns and current paystubs, etc.)? Were all assets needed to close the loan identified and sourced with current statements?

You should also ask what assumptions were used when preparing the pre-approval. What was the purchase price, down payment, RE taxes, maintenance, and common charges used for the preapproval? Was the buyer required to sell a current residence? These are all significant in gaining confidence in the value of the pre-approval.

Note that it will likely be necessary for the buyer to authorize the loan officer to speak with you or your attorney, so you may want to discuss this up front. If you wish, we can introduce you to someone who can assist you.

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Q2 - My father and I have the same name and I am hoping to buy a property shortly, so I ordered my credit reports and scores.  I noticed his bad credit is showing up on my report in the form of a medical collection.  This has caused my score to drop significantly. Why is this happening, and what should I do?

A - This is a common occurrence on credit profiles for those individuals with similar or same name family members.  Unfortunately, the credit reports compile information based on name/names, social security number, and address (past and present) of each consumer.  When a consumer has the same name and has lived at the same address as their father, or son, it can be a formula for disaster to credit profiles.  

The credit reports can reflect either or both individuals' information, whether bad or good, for the credit score.

This can be corrected by hiring a credit repair firm or going to www.annualcreditreport.com where you can order your free credit reports.  Once you download them you will see an option to dispute information.  Follow the directions and prompts for disputing errors.  If you don't have the time or inclination you can contact my company www.northshoreadvisory.com.  It usually takes 30-40 days to update the misinformation.

Although the correction will occur the misinformation can reoccur throughout your life.  In the future it is wise to check your credit consistently and when applying for loans, lines, or credit cards the credit must be reviewed at least three months prior.  By giving yourself a good amount of time to make corrections you will help reduce the stress of the situation.

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Q3 - My home is for sale. We recently went to contract and the buyers have a mortgage; however, they need a little more money. If I offer them a second mortgage, as the seller, how does that work? Do I have any recourse if they default?

A - The buyers' lender will have to include the monthly payments for the second mortgage in their debt to income ratio when qualifying them for a loan.  If approved, your risk is that your loan to them is in second lien position behind the lender's first mortgage.  If they're paying their first mortgage, but not your second mortgage, you may be able to place a judgment or lien against their home.  You should speak to an attorney about any recourse.

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Q4 - My home is currently on the market; however, I haven't had many offers. Can I try to refinance while my house is listed for sale?

A - You cannot refinance your mortgage if your house is currently listed for sale.  In fact, most lenders will not allow you to refinance for at least 6 months from the time you took your home off the market.  They will most likely need an explanation letter as to why you've decided to take your home off the market.

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Q5 - My taxes increased, and I am now having trouble paying my mortgage as the payments were difficult to begin with. What can I do? I don't want to default on my mortgage, and I can pay most of it, but I don't know what to do about the other few hundred dollars each month.

A - You could ask your lender for a Loan Modification, whereby the lender could reduce your interest rate and monthly mortgage payment, to make up for the increase in your real estate taxes.  You would have to qualify by proving a financial hardship. 

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If you have a real estate question for Dottie, please send it to; Reporters@WorldPropertyChannel.com