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  1. #1
    Join Date
    Mar 2013
    Posts
    18,340

    Default Re: Buying Another Home by Using Home Equity on the Primary

    Is it against the law to use home equity to purchase another property?
    No.

    Are we (unknowingly) trying to break any rules?
    The bank's rules, obviously.

    The loan officer says that underwriters were unhappy because they realized the bank would make too little profit. Is that a good reason for loan denial? Or do they even need to provide a reason for denial?
    They probably need a reason under FCRA but making too little profit can certainly be a reason.

    They were also concerned that we will move into another home, sell the 1-st one right away and pay off the loan.
    That's right. Money grubbing vultures. Same thing happened to me. I called a couple of banks about a home loan against my house (which is free and clear) so I could buy another house, then sell mine and pay off the loan. Got the same reaction, turned down before I even got started.

    Is it wise in this situation to apply for a HELOAN with another lender? I think it is not, because any lender will see a record of denied HELOAN. Will a lender be able to tell me upfront if they will grant a HELOAN for our purpose (despite a denial)?
    I imagine you would get the same results if you ask for a HELOAN and reveal your purpose up front. Maybe not so if you ask for a regular mortgage loan with a prepayment penalty.

    Is there any way to appeal the decision? (or consider the loan re-evaluated)
    No.

    The lender has no obligation to lend you money unless it with their terms. The "no" is final.

    The proposed closing for another house is in 5 days. The seller (and agents) are aware of the loan outcome.
    Being "aware" means nothing.

    It's what the seller wants to do if you can't come up with the purchase price that counts.

  2. #2
    Join Date
    Nov 2013
    Posts
    7,056

    Default Re: Buying Another Home by Using Home Equity on the Primary

    The bank said you can apply for a mortgage with higher interest rates on the new house. Why don't you consider doing that. Take out a 30 mortgage and pay it down in say 15 or 10 years. Just make sure you use a lender that has no pre-payment penalty.

    You can always apply for another equity loan in the future and use that money to pay down the mortgage.

  3. #3
    Join Date
    Jan 2010
    Location
    New Jersey
    Posts
    3,666

    Default Re: Buying Another Home by Using Home Equity on the Primary

    Why not apply for a HELOC, use that towards the down payment and lock the rate in that you feel is right?

  4. #4

    Default Re: Buying Another Home by Using Home Equity on the Primary

    Quote Quoting budwad
    View Post
    The bank said you can apply for a mortgage with higher interest rates on the new house. Why don't you consider doing that. Take out a 30 mortgage and pay it down in say 15 or 10 years. Just make sure you use a lender that has no pre-payment penalty.

    You can always apply for another equity loan in the future and use that money to pay down the mortgage.
    If the seller agrees to an extension, I agree, there are various more expensive options to make this purchase (conventional 30, 5/1 ARM, etc.). HELOAN/HELOCs are cheaper, because there are no closing costs and also cheaper closing on the house. The problem is that this bank offered very good rate on HELOAN when we applied and denied the loan 4 weeks later stating they didn't like the purpose, though they knew the purpose from day 1. If they were unhappy with their own terms for this loan and our purpose, they should have said it at the beginning. Anyway, I don't want to blame the bank here. I posted because I knew nothing about possible restrictions on HELOAN/HELOC until a phone call from underwriters. I've heard of many people buying other houses, boats, and other stuff with HELOANs and didn't expect to run into this problem.

    Your suggestion works better if we were to move right away and sell the primary (and there would be no or little prepayment penalty), but we aren't.

    Quote Quoting Who'sThatGuy
    View Post
    Why not apply for a HELOC, use that towards the down payment and lock the rate in that you feel is right?
    I thought that is what we have just been denied. I think HELOC just allows to draw money multiple times against the primary residence, and HELOAN is just one time lump sum payment at the beginning. Isn't it? Why would a lender who says "I will not give you the HELOAN to buy another house" would approve HELOC instead? At this point, why would any lender approve a HELOAN or HELOC seeing one just denied?

    Quote Quoting adjusterjack
    View Post


    That's right. Money grubbing vultures. Same thing happened to me. I called a couple of banks about a home loan against my house (which is free and clear) so I could buy another house, then sell mine and pay off the loan. Got the same reaction, turned down before I even got started.
    I wish I was turned down before we started. Now we have a bunch of credit pulls, useless appraisal, tons of wasted time and frustration for ourselves, the seller, everyone involved, and a stupid denial letter.

    Does anyone have a recommendation for an experienced MA attorney in pursuing appeals to the mortgage review board (preferably in Boston) or litigations based on violations of FCRA or MGL 183.64 (discrimination based on property location)?

    Would greatly appreciate.

    Thanks.

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