Dear George: "In the course of buying a home, we hired two lenders. One lender offered us a really good interest rate. A day later, that same lender withdrew the offer. The lender informed us that the other lender had placed "a reserve" for an interest rate lock on our application. We never agreed to that. Do you think the second lender who placed the unauthorized reserve on our application simply found a way to lock out competitors? It now appears we are going to have to pay a higher interest rate than originally offered." -- Unlocked

Dear Unlocked: I find it unusual that separate lenders would know any details of two different loan applications. Were the applications submitted through two different mortgage brokers who then took your applications to the same primary lender? If yes, why would a mortgage broker not go to other sources?

Dear George: "I own fully paid land. I planned to buy a new mobile home to put on my land. The sales company tells me that once I put the mobile home on my land, it becomes part of the land. They also told me that as such, if I miss a payment on the mobile home they could take my land. Is this true?" -- Nervous

Dear Nervous: The sales company's statement might be correct. You should hire a real estate broker or an attorney to represent your interests. Different sates have different laws dealing with mobile homes. Usually, a mobile home is considered Personal Property like your automobile. However, once the home becomes "permanently attached" to your land, many states then deal with it as Real Property ("Real Estate").

The state in which your land is located has recently passed legislation dealing with "manufactured housing." A mobile home is a type of manufactured housing. That new law becomes effective January 01, 2002. One of the key elements to consider is the definition of "permanently attached" in that law.

Additionally, some manufactured housing is excluded. I suggest that you hire a real estate broker who regularly handles manufactured housing or an attorney who is familiar with the new law.

Dear George: "I sold my home. I plan to purchase another one with the profit. If I do not use the full amount of profit, will I be taxed on the balance? The builder said I could put 5% down but that leaves $10,500 profit not reinvested. The new house is $180,000. I have $19,500 to put down.

What if I put 10% down then use the remaining $1,500 to pay for closing costs? Will I still get taxed on the $1,500?" -- Seller

Dear Seller: By "tax" I assume you mean federal income tax. You might not owe any tax at all. The previous federal tax law requiring that the owner purchase a home of equal or greater value in order to defer the taxable gain no longer applies. See IRS Publication 523, "Selling Your Home" for details.

However, you should also obtain the advice of a tax professional. In addition to federal tax regulations, you may have state or local considerations that also require attention.

Dear George: "I have a question about Private Mortgage Insurance. I understand to keep from paying PMI you need to put down at least 20%. That 20% can be cash, a loan or a combination of both. Is the 20% they are talking about 20% of the loan amount, 20% of the sale price, or 20% of the appraised value of the home?" -- Confused

Dear Confused: The 20% required for a down payment is 20% of the sales price as reflected on your closing statement (HUD-1 settlement statement). With a "80-10-10" loan, for example, the 1st lien (mortgage loan) is 80% of the sales price. The 2nd lien is 10% of the sales price leaving another 10% of the sales price as your down payment.

That assumes, however, that the 1st lien lender's appraisal is equal to or greater than the sales price. A lender making an 80% loan (for example) will loan 80% of the appraised value or the sale value, whichever is less. This is commonly referred as an 80% LTV (loan-to-value mortgage). Thus, a lender will lend an LTV percentage of the sales price stated in your contract or the appraised value whichever is the lower amount.

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George Stephens welcomes your questions by e-mail. Because of the volume of mail received, questions cannot be answered individually. Mr. Stephens is not a lawyer and this column does not contain legal advice. If you wish to obtain legal advice, please consult with an attorney or legal clinic.

Published: February 8, 2002

Use of this article without permission is a violation of federal copyright laws.

George C. Stephens, CRB is the Broker of deRaat Stephens, Inc. dba ERA Stephens Properties and the Director of Compliance for eRealty, Inc. Stephens served as 1998 Chairman of the 13,000+ member Houston Association of REALTORS® and is the Vice Chairman of HAR’s wholly owned subsidiary, e-Har, Inc. He is the 2001 Secretary/Treasurer of the 50,000+ member Texas Association of REALTORS® and TAR’s 2002 Chairman-Elect. Stephens holds a Texas Real Estate Broker license as well as a Texas Mortgage Broker License.