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Blanket Loan??

Old 02-01-06, 08:52 PM
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Blanket Loan??

Does anyone have experience with a blanket loan? My wife and I listed our condo for sale and have begun looking at houses. We fell in love with a house tonight and do not want it to get away from us. Our agent suggested that we could use a blanket loan to cover both properties until our condo sold. I understand the basics of it, but am wondering if anyone can comment on them.

Our unit should have no problem selling (86 units sold in the last 12 months) but we don't know how long it will take.
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Old 02-01-06, 09:46 PM
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never heard of it, but I assume you are going to pay a lot of interest and PMI

where are you? RE agents usually try to get you to buy and lie to make you sign. You can always set up a contract where you can get out if your condo doesn't sell after a certain time.
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Old 02-01-06, 09:51 PM
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Yeah, I think we'll try a contingency offer first. The idea on the blanket is that you would basically combine both mortgages into one and do interest only until you sell your other property. I'd prefer not to do that...but we looked at a lot of houses in our price range and this has been the nicest one. In fact, our appraiser thinks it's $10K under priced. It's only been on the market for 2 weeks.
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Old 02-02-06, 06:15 AM
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do you have a real appraiser, or one that works for a bank or RE firm?
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Old 02-02-06, 08:13 AM
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Our agent owns his own appraisal company and just within the last year, he decided to venture into real estate and has hired on a couple of consulting agents to start working with him. So far, so good. His broker is with Keller Williams.
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Old 02-02-06, 08:15 AM
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I'd buy on contingency, most likely. What is the benefit he described to you of a blanket loan?
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Old 02-02-06, 08:27 AM
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If they turn down the contingency offer, then we would look into going with the blanket loan...the only thing that concerns me is that we would own two properties at the same time and our cashflow would be significantly impacted due to a larger mortgage payment (not sure how much more it would be since the blanket loan would be interest only for the first 6 months - 1 year)
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Old 02-02-06, 08:38 AM
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In other words, you'd be paying a shitload of money to guarantee that you'd get this house you found. Seems like a big price to pay. I find it hard to believe there aren't other good houses out there, too.
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Old 02-02-06, 09:13 AM
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I'm hoping they'll accept a contingency offer...it all depends on the seller's timeline.
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Old 02-02-06, 09:27 AM
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Blanket loans are for businesses and commercial properties. I bet you if you asked your agent to refer you to someone who does "blanket" loans they won't have a name.

Another term for them is cross-collateralized. Again, those types of loans are extremely rare, will require that you have a good amount of money in the bank, etc. etc. etc. More than likely just not possible.

Let's say the amount of money you will get from the sale of the condo is equal to n.

What you can do:
  • Get a new 100% loan for the house being bought. Have it packaged as two loans, one for $ (House Price - n ) and the other for $n. When the condo sells, you pay the second loan off.
  • If your bank / a bank allows you, get a home equity loan for the amount you expect to get back at the sale. Use that loan to put a larger down payment on the condo, and obtain a new first mortgage without a selling contingency.

Either of these propositions will mean you need to have pretty good credit and a very good debt-to-income ratio. You may find that you will need to show the bank a proposed lease for someone who may rent the condo if it doesn't sell in time, if your income is not enough to cover both payments as well as your other recurring credit report expenses.

Plan for this scenario: Let's say 6 months go by without your condo being sold. If you can afford to carry that through, then go ahead with it. Otherwise, you're making a very risky bet at a time when it's not necessarily in your favor to do so. It is not unnatural for homes (especially specialty homes like condos) to remain on the market for weeks or months.
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Old 02-02-06, 09:31 AM
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you are being scammmed

the realtor is telling you are getting a deal to get you to bid more
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Old 02-02-06, 09:32 AM
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Update: I just searched our system of wholesale lenders for CA (since I don't know your state) and I found one place in the whole state that does them and they do it only for commercial properties. You can also expect to pay a lot of points have a pretty nasty rate (prime + 5, etc.).

You're 100% better off to go the other route (described above) and probably 300% better off waiting until your condo actually sells.
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Old 02-02-06, 09:33 AM
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Originally Posted by al_bundy
you are being scammmed

the realtor is telling you are getting a deal to get you to bid more
Al's hit it on the nose. Stick with the appraiser your lender is using, as an inflated appraisal value doesn't help anybody, especially if it's an agent's "buddy" ...
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Old 02-02-06, 09:36 AM
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even lenders use appraisers that get them the right numbers to make the loan. They don't care since with the gains of the last few years they don't think they can lose if you foreclose.
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Old 02-02-06, 09:41 AM
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Originally Posted by al_bundy
even lenders use appraisers that get them the right numbers to make the loan. They don't care since with the gains of the last few years they don't think they can lose if you foreclose.
Well, yes, that's true. But there's always a limit to that. Most if not all lenders have an internal appraisal review department who will happily knock down the value of a house if it doesn't fit the values they get from running an automated valuation report on the address. But they've been a lot less strict the past couple of years.

Also, remember there's areas in the country (North Carolina for example) where the increases have been pretty minor. So it's common, but not universal.
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Old 02-02-06, 10:31 AM
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Thanks for all of the advice. I believe the best route to take is probably the most conservative approach which would be to make a contingency offer and hope they accept it. We still don't know the seller's timeline, they may not be ready to move right away and may be content waiting until our condo sells as long as they know they have a buyer for their home.
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Old 02-02-06, 10:51 AM
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I think it sounds like you need a BRIDGE loan. I did this when we bought our house.

We wanted to move right away to be closer to my husband's work and knew it would be easier to sell our home without all our junk in it.

So we took out a bridge loan which paid off our current mortgage and loaned us the downpayment on the new house. We had six months before we would start making payments. The loan holds six months interest in escrow, so if you sell your house quicker than the six months, you get that money back.

It worked very well in our situation. We ended up selling our house just before the bridge loan payments kicked in!
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Old 02-02-06, 01:28 PM
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Found out more about the home owners...they are building a house and will be closing on March 31st. Since they are rushing to sell, I think we may wait longer and if it's still available, put a squeeze on them price wise. The closer they get to closing on their new house without selling, the more likely they would come down in price. And there's a better chance that we would sell our home by then.

If it doesn't work out, there are always going to be plenty of homes available on the market.
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Old 02-02-06, 01:31 PM
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Now you're talking. The only negotiating position you have is being willing to walk away.
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