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We bought a house on land contract w/balloon. When we look for a mortgage would it be considered - refinance or new purchase?

by Gwen Hancock from Grand Rapids, Michigan. Feb 23rd 2012 Reply


Donald LaPlume (dlaplume)
#6 ranked lender in New Hampshire - 47 contributions

Hi Gwen,This would be treated as a refinance. When you do your refinance I would recommend planning your cashflow needs over the next several years. If you have equity to work with. Here is what I mean, think about any large projects or expenses you might need to plan for. Many times people will take cash out of their house for those types of projects. The reason I mention this is that rates are so low right now but they will not be this low forever. Your total cost of borrowing may be lower if you planned future needs into this refinance. You would also only have one set of closing costs rather than 2. This might not apply to you but if it does it is worth exploring options.Wishing you all my best.Don LaPlume

Feb 23rd 2012
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John Schweer (johnschweer)
#9 ranked lender in Missouri - 163 contributions

it should be a refinance as there will be a recorded lein on the property.

Feb 23rd 2012
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Patrick Munce (mtgbuyer1)
#26 ranked lender in Michigan - 11 contributions

Good Afternoon Gwen-it can only be a refinance because the land contract (installment sale- the operative word being "sale") you entered into actually conveyed a "bundle of rights" to you called "equitable interest". As long as you continue to pay and meet the contractual agreements within the agreement. I sincerely hope this answers your question. Warmest Regards,Patrick Muncepmunce@Goldstar Financial.com

Feb 23rd 2012
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William J Acres (William_Acres)
#73 ranked lender in Arizona - 8,726 contributions

This type of transaction would be considered a refinance since you already own the property. WilliamAcres.com

Feb 23rd 2012
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Jack Cyrul (Jack Cyrul)
#5 ranked lender in Michigan - 94 contributions

Refi for the best rate and lowest closing costs call Jack C at 734-395-9027

Feb 23rd 2012
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Bert Carpenter (BertCarpenter)
#37 ranked lender in Arizona - 1,828 contributions

You didn't indicate how long until the balloon occurs, but with rates where they are, you shouldn't wait. This would be a refinance as the others have indicated, but you need to be careful with a land contract. In most cases, the actual title to the property does not convey to the buyer until the final payment is made. This means that if you default, it is possible to lose the property, and the seller does not have to foreclose. For this reason alone, I would encourage you to get it refinances as soon as possible. Work with a local Mortgage Banker/Broker, rather than one of the big banks. Unlike a bank employee, who is most likely just an order taker, a Mortgage Broker/Banker is Trained, Tested and Licensed in all aspects of Mortgage Origination. He/She will have access to loan products of many lenders, not just those of one bank, and can properly guide you. But more importantly, He/She is trained to take a look at the various different options available to you and guide you into the one that makes the best sense for your situation. Don't forget to check out your selected Mortgage Originator at the National Mortgage Licensing System at www.NMLSConsumerAccess.org ~ Bert Carpenter, The LoansA2z team of NOVA Home Loans ~ NMLS 40586 ~ www.LoansA2z.com

Feb 23rd 2012
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Gwen It should be treated as a refinance . . . however good luck finding someone who will do it as a refinance. I have been trying now for over a year to refinance my home bought in this method (recorded sales agreement) and no lender wants to touch it with a 10 foot pole. I have had 3 very dedicated mortgage brokers that were certain it could be done; only to find out after many contingencies were met, that they couldn't do it. My best hope so far is doing a Home Equity line of Credit. The rules are a little less restrictive. It gets the property in my name on the "title and deed" and then a cash out refi can be done.

Dec 4th 2012
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