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Now that we know the issue is the occupancy status, what is the full situation for employment, living, etc? Unless you own your own private plan, or are pretty wealthy (which you could be), it's going to be hard for an underwriter to accept the fact that you commuting every day from the Big Island to another (Maui, Oahu, etc.) for employment. Plus to buy a $185k home when you already have a home appraised at $800k - looks like you are downgrading, and that doesn't help an underwriter feel any easier.
buyer A full time on o'ahu. buyer B would be paid monthly income of $1700 as a family caregiver. buyer A would fly back and forth from big island to o'ahu 1-2x/month and would stay with family on o'ahu that currently rent a property that both buyer A & B own (title is in an llc). travelling back and forth between islands is quite common.
kailua, o'ahu homes are over assessed and the market value for this property is app. $800k for this 50+ year old home on app. 13 thousand sqft. 3 bedrooms/2 baths with an attached cottage 1b/1b being rented for $1100. we would also rent the main house for app. $2500. total rental income would be app. $5200/mth (includes main house, cottage and other property).
we are not trying to downgrade. properties on the big island: you get more for your money. the one that we are interested in is on 3 acres built in 2004. 1b/1b with 700sqft lanai 3 car garage with one portion of the garage converted into a bedroom.
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Also, even though you can get insurnace on a home in a Flow Zone 3 not all lenders will accept a property in one. I'm looking at several of my lender guidelines and under ineligible properties many of them say "Lava Flow Zones 1 through 3".
none of the lenders have mentioned that the loans were rejected for being in lava zone 3.
Well, your situation is definitely not one that an underwriter would want to easily approve. There are a few things of concern here, which you explained a little about, but an underwriter would want a full blown explanation. You have to understand the current lending environment, underwriters are more skeptical in making loans now, something that would've easily been approved a year ago under questionable guidelines aren't even available now. Also, I can't determine your demeanor yet (hard to do that over the internet and all), but this is a loan where you should be willing to provide a lot of documentation vs. trying to get approved on just the bare minimum.
First, what is person A & person B's relationship? Are they married? Siblings? Family members? Two people who met on Craiglist? That could be a difference, if two unrelated people are buying the home, it's more likely to be an investment property than it would be both their primary residences. If the relationship is not apparent, an underwriter would probably want an explanation regarding this.
Second, why is Buyer A flying back to Oahu 1 or 2 times a month? How long are they staying in Oahu? How long are they staying in Hawai'i?
Third, in order for an underwriter to believe you are converting your home on Oahu to a rental, you will likely need to have signed lease agreements, a security deposit receipt & evidence of depositing the security deposit (bank statement showing the money going in). Since this is a unique situation they might also want to get the security deposit cancelled check from the tenant's account too. Up to the underwriters discretion what documentation they are going to require. If the new loan you are getting is a Fannie Mae, Freddie Mac, or FHA loan (or any non-portfolio lender) then you will also need to have a certain amount of equity (25% or 30%) in order to use that rental income to qualify... that is, if you even need it. If you can qualify for both mortgage payments on other income, and have the required amount of assets/reserves, then rental income, and thus the equity requirement, wouldn't be needed. I still think an underwriter would want to see the documentation on the rental contract, etc. regardless if you need the income to qualify or not though.
Is buyer B's future caregiving income of $1,700/mo being used to qualify, and is it needed to qualify? Because buyer B hasn't been paid for caregiving in the past 7 years, and if that has been their only employment, then there could be complications using that as qualifying income.
Another angle is are you willing to buy this as an investment property? With 20% down there are still lenders who have investment property programs (although a good chunk I'm seeing are changing to requiring 25% down). Rate is higher, that is for sure, but you get it done and don't have to continue fighting this.
Or... do you have enough equity in your current home to take money out and buy the new place with cash? That way you don't even have to deal with a purchase money mortgage.
Both those last two recommendations would assume you could qualify to buy the home as investment property and/or qualify for a cash out refinance of that size.
Also on the Lava Zone issue... you have to realize that at first they said you were pre-approved for an owner occupancy home, and then they are later saying you are not. It sounds like not a whole lot of research went into that pre-approval letter and it was more or less something to enable you to make an offer on a home rather than an assurance the underwriter/lender is OK with your credit, employment, income & assets and general situation. How much research do you think has gone into something a little bit smaller (and unique to the property you are buying) on the Lava Zone issue? If your broker is located in the 808 state then I'm sure it is one of the items they have thought of, but if they aren't, and it hasn't been brought up, then it's something I'd surely ask about before it could become an issue.
rather than quoting the entire post, i've answered by paragraph:
#1: we've provided loads and loads of documentation.
#2: domestic partners. documentation provided to lender. owners of 1 property already + another parcel of vacant land. buyer A also owns current residence with mom.
#3: buyer A's full-time position is on o'ahu. cannot transfer to the big island because that type of position isn't available. would stay at investment property on o'ahu with family members who rent it from both buyers until another job is secured on the big island. buyer A's big island property would be permanent address.
#4: no problem getting the rental agreement and cancelled check. we also hired a property management firm. this was one of the contingencies of getting the loan.
#5: buyer B's $1700/mth as a caregiver was not used as consideration for the loan with the original lender. it was with subsequent lenders.
#6: investment property: metlife has mentioned this. we do understand that the lender has become more stringent. but, why send us the pre-disclosure indicating it as owner occupied just a few days earlier? our mortgage broker told us not to sign the documents until it was discussed with her first. she then contacted us days later and said that metlife/underwriter was skeptical and said it was an investment property. putting more than 20% down is not a problem.
#6: buyer A and her mother own this current home with no mortgage at all. it's free and clear. there is a HELOC on it of $80k with a zero balance.
#7: mortgage broker (local) was working with metlife here on o'ahu. central pacific is also here. she is now working with another local bank and trying for first mortgage on our current residence.
i sent the broker an email a few minutes ago regarding metlife and the possibility of still using them for an investment loan. she said that they will not consider our $2500 rental income from our current residence (don't know why when we could provide an agreement) so therefore we wouldn't qualify. she's hoping to hear from another local bank either tomorrow or by friday.
Thanks for all of that further info. I can see where an underwriter would feel uneasy about this being treated as a primary residence. The industry term is a "trailing spouse", and it's where you are buying a new home in a new location but one of the borrowers will not be moving in right away due to not having secured employment at the new location. Usually this is OK permitted the borrower who is going to be living in the new home as their primary residence right away is able to qualify on their own (and a portion of the trailing borrowers income can be used as well, plus all assets even if individual accounts). Are you not able to qualify on your own under the "trailing spouse" guidelines and person A's full income is really needed? If that's the case, then that could likely be why it's not fitting as a primary residence.
Let me understand something here, are there 3 seperate properties we are talking about?
1) Home on Big Island that person A + B are buying
2) Home on O'ahu that person A + person A's mother own, which is also person A & person B's current primary they are moving out of, and will subsequently rent out (this is the 3b/2b with an attached cottage 1b/1b which you'd rent out for a total of $3,600/mo)
3) Another home on O'ahu which person A + B own (titled in an LLC) which is already rented out for $1,600/mo
And Metlife is saying that they won't allow the $2,500 of the $3,600 of rental income from the 3b/2b + 1b/1b property? Did they give a reason why not? The equity requirement has clearly been met if all that is against the $800k home is an $80k HELOC with $0 balance.
The deal with a new cash out refinance on your current primary residence is that it'll actually have to be done as an investment property since it's both person A & B's intentions are to move out of the home as soon as is possible... unless person A's mother will live in home #2 (from list above) as then she could be on the loan and it would qualify as an owner occupied (person A's mother would owner occupy it) with a non-occupant co-borrower (person A who would be occupying it for a short time but not eventually in the long run), using the full income of person A.
now, i understand (paragraph #1). i do not qualify as a "trailing spouse." frankly, i've never heard the term before. and, yes, i can not qualify on my own. buyer A's income is needed.
three separate properties. yes.
ignorant me, i didn't ask the broker the reason (s) metlife will not allow the $2500 rental income. the broker is now working with another local bank. i'm not "banking" on it. forgive the pun.
last paragraph: all three of us including person A's mother intend to occupy the new property as the primary residence. person A has power of attorney over her mother because she is mentally incapcitated from making decisions (alzheimer's). she was put on the title back in 1986 prior to her mother's diagnosis in 1998. title passes with rights of survivorship for our current residence.
Well I think we've figured pretty much everything out - except the reason that Metlife wouldn't want to use the $2,500/mo rental income from you. I kind of think the underwriter there got scared, I've had that problem with Metlife (formerly First Horizon) underwriters before, they aren't as experienced as others it seems. As long as the loan is submitted appropriately I think with the next bank you'll have better luck. That would be plan A.
Since the mom would be moving into the Big Island home as well, the only way to treat a refinance on the O'ahu homes would be as non-owner occupied... but that would be plan B.
bad news, it didn't go through. broker is now trying one last local bank and has given them until the 13th. closing is supposed to be the 14th.
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