Monday, June 28, 2010

Getting a loan on property that had additions or conversion without permit

Nowadays, will lenders lend on a property whose garage has been converted to living space without permits? It depends on several factors:
1. What type of room was the garage converted to? To a bedroom, kitchen, or just a bonus room?
2. Did the previous owners ADD any new electrical or water supply to the garage? Or are the only utilities to the garage still just the pre-existing washer/dryer hookups that existed in the garage before the conversion?
It is possible to do a loan with a converted garage if the garage was converted to something simple, such as a Family room.

If the converted garage had electrical or water added, then getting a loan gets more difficult. For example, if the owner decided to put a kitchen in the garage, or perhaps a bathroom without permits, the property then becomes non-compliant and getting insurance becomes a problem and getting a loan on the property becomes VERY difficult.

If, for example, the seller built another restroom without permits in the backyard, the restroom built in the backyard will require permits. For the most part, lenders will NOT lend on this property unless it does have permits because of the outside bathroom.

One possible way to get a loan in this difficult case would be to look at who is the existing lender on the property. IF that lender lent on the property previously and it didn't have permits there MAY be a possibility of them re-lending on the structure. IF however, the owner added all these things AFTER the loan was closed, you're going to have a problem.

Guidelines have tightened up A LOT in today's lending market, mainly because of all of the foreclosures and short sales. Previously, IF the appraiser looked at a garage conversion and did NOT give ANY square footage toward living area, many lenders would not be too concerned since that area was NOT counted in the over all square footage and the value of the property was treated as if NO conversion took place.
The real problem comes into play when owners start adding kitchens and bathrooms without permits. This is because of potential fire hazards. A single family residence is supposed to have 1 kitchen and the bathroom count is per the original specs of the floor plan of that unit which is recorded with the building department. If the owner changes any of the original structure without permits it becomes harder to get insurance and loans....ESPECIALLY in today's market.

My lender contacts have closed quite a few loans WITH garage conversions BUT they were closed off rooms with NO additional bathrooms OR kitchens. In several cases the original garage door was still intact, just sheet rocked. This type of conversion is easy enough to convert BACK to the original garage because the structure itself was NOT tampered with.

Saturday, June 19, 2010

3 precautionary steps before you apply for a loan

I got the following inviting email offer in my SPAM folder: "Reach more Qualified Prospects with Credit Bureau Data". Someone claiming to be Amorena Cervantes from Endless Resources, Inc. was offering to sell me a long list of mortgage leads based on mortgage triggers.

What are Mortgage Triggers?
When you apply for a mortgage, your lender pulls a copy of your credit report,which triggers an inquiry. The credit bureau can then turn around and sell your name to other mortgage companies who may want to compete for your business. This is called a mortgage trigger lead.

Here are some examples of information that may get sold to telemarketers:
  • whether or not you've applied for a mortgage recently
  • your location
  • your credit rating
  • your loan-to-value (LTV)
  • aggregate balance of your open mortgage trades
  • your combined mortgage and HELOC balances
  • age of your most recent mortgage trade
  • your mortgage lender name
  • your current mortgage type

Is this legal?
Yes, the Fair Credit Reporting Act allows the sale of your name. That means credit bureaus can legally sell your information to third-party vendors if you don't do anything to prevent them from doing so. That's why you need to take some action to protect yourself from trigger lead harassment.

1. Sign up for OptOutPrescreen.
Go to and follow the instructions. This will stop the four credit bureaus (Equifax, Experian, Innovis and TransUnion) from selling your name as a trigger lead. Opting out puts a stop to trigger leads for five years.

Furthermore, some lenders say that by opting out, you can add 10 to 15 points to your credit score! For permanent restraint, you will need to mail in your registration, which is also available on the OptOut Web site.

Here is the confirmation message you will receive if you go through the online 5 year opt out procedure. "The following is a confirmation of your 5 year Opt-Out request. Please click here to print this confirmation for your records. Your request will be completed within 5 business days. Although your request becomes effective with Equifax, Experian, Innovis and TransUnion within five business days of your request, you may not see an immediate reduction in the amount of offers you receive. This is because your name may have already been provided to some companies that have not yet mailed their offers to you. You may continue to receive certain firm offers for several months.
While your name will be removed from the lists that Equifax, Experian, Innovis and TransUnion provide to businesses for the purpose of making you a firm offer of credit or insurance, you may continue to receive offers from sources that do not use Consumer Credit Reporting Companies to compile their lists."

2. Put your name and phone number on the National Do Not Call Registry. You can register your cell phone number as well. Do this at least a month before you apply for a loan because it takes 31 days to take effect. You'll have to re-register every five years because the order expires at the end of five years.

3. Register with the Direct Mail Association to prevent mortgage lenders from sending you direct mail. You can register online or through mail. Either way, it will cost you $1.00, which can be charged to your credit card. Register early because the DMA distributes its lists quarterly, so it could take a while to become effective. This registration is good for five years.

Monday, June 7, 2010