Q & A with Dottie Herman

» Featured Columnists | By Dottie Herman | August 6, 2010 8:59 AM ET

Q1 - My wife and I want to buy our first home. We do not have a lot of money for a down payment however we both have stable jobs and good income.  Is there any type of mortgage that we can get where we do not need a large down payment?

A - FHA mortgages allow you to put 3.5% down and are designed for people in your situation.  FHA (Federal Housing Administration) loans are guaranteed by the FHA, a US government organization for the purpose of supporting home ownership in the United States.

Q2 - I am relocating to NYC from the West Coast for business. I have only been to New York once in my lifetime and I am unsure how to decide where to purchase. I am not opposed to a short term rental to get used to a neighborhood and see how I like it- do those exist in NYC? If not, how can I decide where I should buy?

A - You have many options to consider.  Yes in NYC there are short term rentals that you can take advantage of to get a sense of different neighborhoods. I would highly recommend you work with an experienced agent who can show you around to different neighborhoods.  This way you can start to get a sense for not only pricing but for how each neighborhood feels to you. 

Q3 - I recently got approved for a mortgage, we went to contract on the home, and are prepared to set a closing date. When the rate-lock expired because of other issues with the seller, my bank suddenly asked for more information and documentation from my accountant. Is this standard? Why would I be approved and then after 60 days they require more information?

A - This is rather common, and often catches buyers off guard when a closing is delayed and the process feels like it is starting all over again. If you read the approval letter it most likely refers to document expirations. This occurs because documentation you provided has an expiration date and depending on the document's type, lending guidelines require that documents need to be current within 60 to 120 days from closing.

Q4 - I own a few homes and some of them are currently on the market. I want to offer seller financing, however, what recourse do I have should the buyer default?

A - Should the buyer default, you have the same rights as a bank or any other lender. You are permitted to file a lien and begin a foreclosure to force the sale of the property to repay you.  This is a legal process for which you will need to hire an attorney. You will be able to recover your principal, interest, taxes and penalties as part of this but remember that the sales price must be enough to cover all of these costs. Since the foreclose process can take from one year to many years, these fees can add up. You can also sue and place a judgment on the person for any monies not recovered by the foreclosure sale. If you are considering holding the mortgage, have an attorney explain all aspect of this to you and have them handle the paperwork. My advice is to make sure you get at least a 25% down payment so you have a cushion in the event you do end up in a foreclosure.

If you have a real estate question for Dottie, please send it to;
NOTE: Due to high volume of questions, not everyone can be answered, but she'll do her best.

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