|
|
|
|
Home Contact Us
COUNTY INFO CITY INFO REAL ESTATE BROKERS FOR SALE BY BROKER FOR RENT BY BROKER FOR SALE BY OWNER Test One FOR RENT BY OWNER VACATION RENTALS PROFESSIONALS MORTGAGES INSURANCE REAL ESTATE NEWS MAPS WEATHER
|
David K #3: When to Call in the Accountant DAVID K'S FINANCIAL FINDINGS #3 Complicated Mortgage Scenarios Should Include a Consultation with an Accountant A couple of months back, we penned a column about the mortgage originator's role evolving into that of a mortgage financial advisor. This particular column stressed the importance of having some basic CPA and financial advisory knowledge to better serve a clients needs. What we did not illustrate was how these scenarios relate to the everyday mortgage application process. The following is a true scenario. The names have been changed to protect the innocent. Karen and Sam were in Asheville shopping for an investor property. We received a referral call that they would like to meet with a local lender so they could make an offer on a wonderful restored property in Montford. Their logic like many others hoping to relocate to Asheville was to secure a property now before prices escalated any further. It was not your typical pre-approval. They both had plenty of money in savings for the down-payment, both made terrific incomes and both of them had "stellar" credit. But, they were financially savvy and had concerns that since they were not married and did not file jointly, who would claim the property on their personal tax returns? They communicated to me that it should be Sam because he made more money and needed the additional deduction. They also let me know that they jointly owned a property in California with a fair market value of $975,000.00. The balance owed was only $160,000.00. Karen was the conservative one. She hated having a mortgage at all and was determined to pay the Asheville house off as quickly as possible. During the course of our meeting, we decided to do the transaction as a second home. I advised them that as long as they legally occupied the property a minimum of 15 days out of each calendar year, they would not have to pay investor rates. Our meeting concluded with their deciding to put down 20% to avoid mortgage insurance. They selected a 30 year fixed (Karen wanted a 15 year fixed) and I gladly issued the pre-approval letter. As they were leaving, they informed me that they had an appointment with a highly respected CPA in a few weeks. Well, that meeting was destined to change everything! A week prior to closing, Sam called a little distressed and said that the CPA had counseled them that their whole plan was flawed and needed to be restructured. When I called the CPA, he explained that because Sam made $150k a year, he was subject to passive loss rules and that Sam would get no additional benefits for owning this property in Asheville. His advice was to "cash out" refinance the primary residence in California and pay cash for the Montford property. Needless to say this was a last minute dilemma! They did not have time to cash out their California property to pay cash in Asheville. They also feared that if they did not perform within the timeframe of the contract, that they would forfeit their $10,000.00 earnest money deposit! Karen and Sam had no choice but to close in Asheville but were now concerned about the amount of closing costs they would incur on a loan that they would soon pay off. Given the size of the loan, I advised then to switch loan products and close on a total no closing cost option. Instead of a 30 year fixed, we choose a 5/1 interest only ARM and wrote the note rate high enough to pay a premium which was used to offset the borrowers' closing costs. There was no origination and no lender fees. Furthermore, the lender credited the borrowers for the attorney fees, title fees and recording fees as well. The only thing it cost the borrowers was an appraisal fee. This provided the solution to cash out the California property at a later date and rectify the situation. There are many ways to walk though the maze of life's mortgage options. Things change! The important thing to remember is that you get safely to the other side. Remember, you usually get what you pay for in any transaction. Be smart and shop wisely! fwf9dkff3complicatedmortgageaccountantbb1
ABOUT ASHFORD MORTGAGE: COPYRIGHTS AND REPRINTS: |
|
