Per Tim Sullivan the home is now worth $230K. However, there is no evidence of an appraisal. We would advise that you have a certified appraiser appraise the home to find the true market value. Based on the information in Exhibit 1, the median home prices increased by 20% from 2001 to 2002 in Lawrence. Given that you purchased the home in 2001 for $157,900 including a 20% increase, the home value would be $189,584. Unless significant improvements have been to the property, it would be highly unlikely that the value increased 46% to $230,000. Without an appraisal, I would take the conservative approach that the home value is no more than $189,584. Furthermore, looking at historical home prices from 1988, home prices have increased by about 3% per year, with fluctuations in individual years. We believe that you should not believe that the home values would continue to increase at 20% per year. Therefore, continuing to borrow against the equity to pay down other debt is not advisable.
Historically, loan officers have used the Five C’s to determine the type of loan the borrower could qualify for. These are items that determine if a borrower will qualify, and...