Help with Terrible Home Buying Financing Options

[Anonymous]

Apologies that this is long, but I'm in a pickle. We're in a two-bedroom with three kids and two dogs, so we really need to move. Fortunately, we found a new build right around the corner that has everything we need.

FINANCING COMPANY #1

We did the preapproval paperwork with financing company #1, and they said we would qualify for 90/10 financing at 4.0%. This option also would allow for us to pay down and refinance every year but with a locked-in interest rate. This is helpful because my income is largely based on end-of-the-year bonuses. This also is helpful because we currently have very little in savings because we paid off the final $150K in student loans using last year's bonus.

After submitting the paperwork, however, (and after we made a $40K earnest money deposit on the home) the company discovered "in their final review" that the house is zoned as a condo and does not qualify for this financing. Instead, we can have the same option if we make it a 85/15 loan. To do that, we would need to take a hardship withdrawal from our 401K or ask for an advance from my employer, which seems like a terrible idea. The financing company said that we could not take a loan out to cover the difference.

FINANCING COMPANY #2

We then went to the financing company associated with the builder. They offered us a 80/10/10 option, wherein we take out a personal loan for 10%, put 10% down, and then mortgage the 80%. This loan would have a 4.75% interest rate and would not allow for the penalty-free refinancing provision.

Help, oh DCUM financial gurus? Which poison would you drink?

[Anonymous]

Please tell me you have a financing contingency? Because those both seem like bad options.

[Anonymous]

I would try again. I think financing company #1 is trying to scam you into a higher rate. It's not a condo right?

[Anonymous]

Anonymous wrote:Please tell me you have a financing contingency? Because those both seem like bad options.

Given that the seller is offering us a mortgage, the financing contingency does not apply. The contingency applies only if we cannot get financing. We can get a mortgage, but the options stink.

If we could rewind and knew that the first option wasn't available to us, we wouldn't have purchased. But it is what it is at this point.

[Anonymous]

Anonymous wrote:I would try again. I think financing company #1 is trying to scam you into a higher rate. It's not a condo right?

It's a townhome that is zoned by the city as a condo. I checked with the city and it is in fact zoned as "condo ownership."

[Anonymous]

Zoning has nothing to do with it being a condo or not.

[Anonymous]

Anonymous wrote:Zoning has nothing to do with it being a condo or not.

yes, this. This feels like a scam, OP. If there were truly a condo, you would have received the number of condo disclosures about how the association will operate, reserves, etc. I appreciate that this is a new build, but you should have received something.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Zoning has nothing to do with it being a condo or not.

yes, this. This feels like a scam, OP. If there were truly a condo, you would have received the number of condo disclosures about how the association will operate, reserves, etc. I appreciate that this is a new build, but you should have received something.

I just looked back at the paperwork, and there is a condominium addendum. We were never asked by financing provider #1 whether it was a townhouse, condo, etc. Instead, we provided them with the draft paperwork before we signed. They now say they simply "overlooked" this addendum. I'm pretty pissed about it, but I do think it is a condo.

[Anonymous]

How long ago did you get the paperwork? In D.C., you have three days to get out of the deal because of the condo disclosures, no matter what other contingencies you do or don't have. Maybe you can walk on that.

[Anonymous]

I had a mortgage company try to scam me like that too. They were going to let me keep my condo and buy the new house, but then later they decided I needed more up front money (I had 20% down) or pay a higher interest rate. I walked. I refused to get had like that. They had me over a barrel. I had given them all our finances up front and nothing had changed.

[Anonymous]

Have you called a mortgage broker to see what other options are out there?

We have used Patrick Holland at Embrace Home Loans for our last two home purchases, he came recommended by a family member and we had a really good experience both times. He also helped friends of ours with a way to buy their new home and keep their current home - which other banks told them they couldn't do. They were able to do it.

Call some more people, you don't have to go with these options.

[Anonymous]

This option also would allow for us to pay down and refinance every year but with a locked-in interest rate.

This isn't a standard option in any mortgage that I have ever heard of. I wouldn't worry about this honestly. Do you really want to re-cast your mortgage each year? It sounds as if you are really cash poor, pumping extra money into your mortgage each year from your bonus shouldn't be a major concern. If you do pay down your mortgage with extra payments, you will just pay it off faster, rather than get a lower payment.

[Anonymous]

Anonymous wrote:Have you called a mortgage broker to see what other options are out there?

We have used Patrick Holland at Embrace Home Loans for our last two home purchases, he came recommended by a family member and we had a really good experience both times. He also helped friends of ours with a way to buy their new home and keep their current home - which other banks told them they couldn't do. They were able to do it.

Call some more people, you don't have to go with these options.

This. Call Roger Dennis

https://nfmlending.com/rdennis

[Anonymous]

Anonymous wrote:To do that, we would need to take a hardship withdrawal from our 401K or ask for an advance from my employer, which seems like a terrible idea. The financing company said that we could not take a loan out to cover the difference.

This is non-standard, and they probably just don't know what they're talking about. A 401K loan is a much, much, much better option than a 401K hardship withdrawal.

[Anonymous]

Anonymous wrote:

Anonymous wrote:To do that, we would need to take a hardship withdrawal from our 401K or ask for an advance from my employer, which seems like a terrible idea. The financing company said that we could not take a loan out to cover the difference.

This is non-standard, and they probably just don't know what they're talking about. A 401K loan is a much, much, much better option than a 401K hardship withdrawal.

My office does not permit 401(k) loans at all. The financing people said that taking out a bridge loan, etc. would mess up our "debt/equity ratio" and disqualify us from the product.

In the meantime, thanks to the sage advice on here, I'm reaching out to other companies for alternative financing. I was in a full panic, so I appreciate all of the help.