Ask a Broker: Does purchase of 'double lot' mean double the pleasure?

By Peter G. Miller

Q: What does it mean when you buy a property and are told that it sits on a double lot?A: A "double lot" means that you have bought a parcel of property that has two deeded elements. This may be good news.First, can you finance the property by having a loan secured by only one lot? If the answer is "yes," then in the future you may be able to sell off the empty lot without refinancing the property. Alternatively, if both lots are required to secure financing, you will need a "blanket" mortgage from a lender - one loan for two pieces of property. If this is the case, see if you can get a "partial release" clause built into the loan so you can sell off a lot without the need to refinance.Second, how is each lot zoned? Are they both build-able lots? What about sewer and water? Third, what about title? Does each have good title? Is each free of liens?Fourth, what about access? Can you reach a public road from each lot?Sit down with your broker and go through these questions and others. You may have a very good situation, especially if the property is in an area where build-able lots are in demand.Q: We put a contract on a house and are financing with an FHA loan because of a prior bankruptcy. However, we are putting $120,000 down on a $320,000 house. Therefore, we will be putting down more than 20 percent. Our lender told us that since we are using an FHA loan, we still have to pay the PMI insurance. He said all FHA loans require that the borrowers pay the PMI insurance. I thought that you only had to pay the PMI insurance if you put less than 20 percent down. Is our lender correct?A: In exchange for putting down less than 20 percent, borrowers under the FHA program pay a mortgage insurance premium (MIP) each month until the original mortgage balance is reduced by at least 20 percent. In most cases they also pay an up-front fee at settlement.In your case you have elected to use FHA financing because of credit issues. If you fail to repay the lender, the FHA still has an obligation to cover some or all of the loss, thus there is a need for insurance coverage.The central issue here is the bankruptcy. David Reed, author of Mortgages 101 (AmaCom) and an Austin-based loan officer with SouthTrust Bank, says FHA guidelines "will allow for a bankruptcy if it's been discharged for at least 24 months, or if it's currently in a Chapter 13, as long as the payments to the trustee have been made on time."Given the amount down, why not see if any conventional financing plans would be open to you? Instead of $120,000 down, how about offering to place a year's worth of mortgage payments in escrow and then use the balance for a down payment? Or, see if the seller would be willing to take back a loan.Q: My brother and I own property in Cape Coral, Florida. He wishes to have the property put solely in my name. I'm Canadian. How can we make this happen?A: Is there a mortgage on the property? In the usual case, before you can change ownership you must get permission from the lender. Why? Because the lender likely has all owners obligated to pay the debt. If the lender will not issue a release, you may be forced to refinance the property.If there's no loan, your brother could easily shift his interest to you. However, before anyone touches a deed you need to determine the tax and legal consequences of an ownership change. Is it a gift? A taxable event? Is there an estate issue? You don't want a surprise that could cost tens of thousands of dollars. Speak with the appropriate professionals in both countries before going forward - and get a Florida attorney to do the title and recordation paperwork.Q: Is it true that you must have 10 percent of the purchase price for a condo put down within 10 days of purchase?A: It may well be that an owner wants 10 percent down, but this is a negotiable matter. If you are still bargaining, you could require different terms and conditions. However, if a sale agreement you accepted says you promise to put down 10 percent within 10 days, then that is your obligation.Copyright Content That WorksPeter G. Miller, author of The Common-Sense Mortgage, specializes in real estate. You may e-mail questions to peter@contentthatworks.com.