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Hoping to get some advice on what would be the smarter option for getting pre-qualified for a mortgage in NJ. Here's the situation...
I'm planning to purchase a 2 family with my boyfriend of 12yrs, this would be my first home - he has owned the 2 family we currently live in for 13yrs and has a lot of equity in it. We are looking for a home that offers a better living environment than what we have, we would move into the new home and rent out the additional apartment there as well as the one we are living in. He won't be selling his home in this market
I have great credit and enough savings for a 20% down payment on a home around $200k - but I have a low paying job so I need a co-signer. My boyfriend has good credit and is very successful in his own business and can take equity out of his home to split a down payment but his taxes are screwed up (being corrected but not soon enough) and cannot show income. I spoke with a mortgage lender who said that if he can't show income, then we may be able to still get a loan but would have to put down 40% which we don't want to do mainly because we would need the additional money to renovate a home in order to get top dollar for the rental unit. I'm considering the possibility of buying the home with my mother who is elderly, doesn't have good credit due to paying for everything in cash, still works almost full-time and has a lot of savings. The plan would be for my BF to buy her out after the home is purchased but I'm not sure if this can be done. I don't want to speak with a mortgage lender again until I do some research on my own.
So pretty much all of my options are not so good - any advice on what I can/can't do or should consider would be much appreciated!
My general advice is to never cosign with anyone for anything. You've laid out a few options/plans with the statement that "the plan is to" or "the hope is to" and then assumed the most optimistic scenario. What if things don't go as planned? You're signing an agreement with a significant amount of money, something that could ruin a relationship.
You would need an attorney to draw up a document spelling out what happens in various scenarios. What if your mother died before she sold to your BF? Do you have siblings/other heirs who would then own a piece of your home? What if you two split in 2 years? Who gets what? Lots of complications.
Do NOT buy with the BF, nor should you buy to which you can not afford alone. Don't involve your Mom in it with a plan like that unless the plan to pay her off is executed rapidly, but I see complications with that (why would do that, if you already have the money?)
Another area of good measure in buying a house is to look at what rents for the same house are renting for in the area. If the new mortgage would be around the same amount as the rents, then I would do it, because if economic times get tough and you have to move-out because you cant afford it, the rent will meet the mortgage payments and you can still keep the property.
You will have to look at cheaper property or get a better job, simply put.
It sounds like some posters are thinking of "boyfriend" as in someone who is often temporary. Sounds like he is your "unofficial spouse" if you've been together 12 years (I wouldn't call you "single"!). I know lots of marriages that haven't lasted that long!
Anyway, sounds like the BF/UOS (my new abbreviation :-) ) isn't a good option because you'd need such a high down payment. Can you consult an attorney about any contingencies if you go in with your mom? Someone else mentioned her possibly dying before your BF could buy her out, in which case your siblings might very well have a claim to your property (unless your mom's will could state otherwise?). Hopefully her death is very unlikely but you need to consider all those "what-if's."
I agree having ANY co-signer is a bad idea, as well as BEING a co-signer - I speak from experience here .
But if you did go along with having the mother co-sign, wouldn't a deed of "joint tenants with right of survivorship" wording eliminate problems with other siblings if the mother died? The OP would then own the whole thing at the mother's death, as I understand things. (Someone please correct me if I'm wrong!)
When you start adding temporary names to the titles houses it can get complicated fast. Consider than in a divorce where one wants to maintain ownership of the house, it can force a refinance to get one person off the loan. If you don't have any ownership of your boyfriend's house I'm not sure giving him ownership of your future house is a great idea. If he has done that unofficially and something happens you'll likely get nothing. I'm not sure how separate your finances are, but if they are separate, its probably best to keep them that way. I would not involve your mother except for an unofficial loan to get the 20% and then you personally pay her back. I would suggest that if you qualified for the house based on your income and can make the payments to the bank and your mother yourself without your boyfriend's help. I do not even recommend borrowing from your mother, but that is the easiest way. It keeps the ownership straightforward and without complication. Like others have said, if your mother passed away and did not update her will, you could lose it by tying her name to it. And similarly, if your boyfriend is charged with tax evasion for underreporting income and you get brought into it, its just a mess. While I certainly understand that a boyfriend of 12 years is more a less a significant other and unlikely to leave, you still need to protect everyones interests if anything unexpected happens.
Thanks to everyone for your feedback - I know the options I listed aren't great but it's what I have to work with. Essentially, my BF and I are looking to buy a home together as a married couple would - we just choose not to get married so having equal ownership of a home is important - guys generally don't like the idea of living in a home owned by their significant other, tends to complicate things. I do not have any siblings or family other than my mom so I don't have to worry about anyone else coming into the mix. Not sure what we will decide but I’ll be sure to give an update!
Thanks!
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