Will an intrafamily loan disqualify me from a mortgage?

Asked by newtothis, Denver, CO Thu Feb 28, 2013

I am refinancing my home following a divorce. I borrowed $35k from a family member to buy out my ex-wife. The $35k went straight to my ex-wife so it never went through one of my bank accounts. I thought this would be in the clear. I am cashing out $35k in equity of my home upon refinance to pay it off. However, the mortgage underwriter figured out that my ex-wife got a large sum of money and asked for a copy of the check. Now the bank has seen that my ex-wife was paid off by someone other than me and I now am worried I will have to report an intrafamily loan which will possibly disqualify me from obtaining the loan. There's so many things I would have done differently if I could do it again but currently my loan is in underwriting. What can I do?

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Tony Grech’s answer
Tony Grech, Mortgage Broker Or Lender, Southfield, MI
Thu Feb 28, 2013
Yes definitely address this with your loan officer. Each lender's requirements are different.

The worst I can see happening is that they count the loan towards your qualifying, but since you are paying off said loan it's a zero sum game. They might require you to write a letter of explanation and/or sign a promissory note to the person you borrowed the money from and get a statement from that person on how much he/she expects you to pay them back to settle things in full.

Although not every underwriter would catch this, it's perfectly normal. The Patriot Act requires lenders show due diligence in digging into things.

I'd recommend you ask your loan officer what he needs from you and give it to him, end of story. I don't see this jeopardizing you getting the loan, but it might add a little time onto things.

Hope this helps. Best of luck!
0 votes
Anna M Brocco, Agent, Williston Park, NY
Thu Feb 28, 2013
You really should be having a discussion with your loan officer rather than relying on online information....
1 vote
jim.varnerr1, , Tracy, CA
Tue Mar 12, 2013
We are in receipt of your email, We offer loan out at 3% interest
rate ranging from $1,000 minimum to $1000,000.00. maximum so i will
advice you fill out the loan application form that is below is you are
really interested in the loan amount and get back to us so that we can
furnish you with our terms and conditions.

(1)Full Name,
(2)Home Address
(9) Age
(10)Amount Needed,
11)Monthly Income,
12)Loan Duration
(13)Loan Purpose
0 votes
Michael Denn…, Agent, Queens, NY
Sat Mar 2, 2013
Lenders are required to consider all debts that may affect a borrower's ability to repay their mortgage and borrower's are required to disclose same. While possible solutions and outcomes will vary with lender and mortgage product, Tony's suggestion that a promissory note may be required certainly sounds feasible. Anna is right, you really need to have a candid conversation with your loan officer about this issue and any others that may affect your application. For more information or assistance, I can be reached directly at 917.699.0183.

Michael Denniston l Cell: (917) 699-0183
Residential Home Funding, Corp.
Licensed Mortgage Loan Originator l Sales Manager
6901 Jericho Turnpike Ste. 219 | Syosset, NY 11791
Main: (516) 605-1733 | Fax: (888) 881-2557
NMLS # 24076 | Company NMLS # 34973
0 votes
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