Father wants to transfer house, what is the best route? (loan, foreclose)

[Cabowabo07]

Hi everyone! This is my first time posting here. I'm rather lost as to what the best course of action is and am hoping for ANY information, since this is my first time.

Issue: My father wants to transfer ownership of his 2-family home over to my brother, my aunt (his sister), and myself (I'll be referring to ourselves as "the group" to make it easier). The house was recently appraised (for divorce purposes) at approximately 400K. Half of that is in equity. Therefore, my father will be gifting us all with the equity in the house, and we would be taking over the the rest of what's owed.

Here is where I'm getting confused. I've spoken to various lenders (big banks, credit union, direct lending company). Currently, the group does not have the best credit. The credit range is between 600 and 650.

My credit is 600, my brother's is 630, and my aunt's is 650. (Based on information from a free credit site, we haven't actually had our credit pulled yet). Even though our credit is not ideal, there is a high amount of equity in the house (200k), there is rental income already on this house (approx. 1.5k monthly), and the group's salary is relatively high for the amount we'd be looking to borrow. Group's yearly salary is 275k a year, and we'd be looking to borrow 200 - 250k. My brother and I have the usual debts (student loan, car loan) and my aunt has a car loan and another mortgage on a rental property.

I was told by the direct lender that if I am on the loan application, our only option as the group would be an FHA loan. When I spoke to my big bank and my credit union, the credit score wasn't as much of an issue given the other circumstances, although my credit union did say that to finance the loan, we could have to go through their "in-house products". The big bank did mention this being an "arm's length" transaction. Also, the big bank and the credit union didn't discuss any closing costs, whereas the direct lender did.

I'm really not sure if I'm doing the right thing or if I'm asking the right questions. The current mortgage (under my father) is about 7 years from being paid off in full, with a fixed APR of 3.24. If and when we do secure a mortgage, our plan is to get the lowest term possible (10 years seems to be the most common option) and the APR's we've been quoted are between 3.15 (without me being on the application) for 10 years, 3.25 (with me on the mortgage) for 7 years, and a 3.5 fixed (on the FHA loan).

Given all of this information, are these my (our) only options in terms of financing? Are there certain things that I should be asking? Is it possible to maybe just take over the current loan? Any information that can be provided would be GREATLY appreciated. Thanks so much in advance!

[399083453]

I have no answer, but I will say, I would never buy a house with anyone besides my spouse. Say one of your family members stops paying, they still own an equal share when it sells, etc.

[Modification Specialist]

Originally Posted by Cabowabo07

Any information that can be provided would be GREATLY appreciated. Thanks so much in advance!

I have come across this situation several times over the last year, recently in Georgia and Washington DC. It is common with divorces. The "Red Herring" is your statement is house was recently appraised. If the ex wife attorney filed a lispendens or a motion with the courts to transfer ownership, or there is an existing court order in the divorce degree. Additionally if the ex wife is on the deed. It can be fruitless to try anything at this point.

Providing the ex wife is not on the deed. The cheapest and easiest way for transferring ownership is going to the local county court house where the deed is filed. Adding other names to the deed (should cost around $25). Your father can deed off. It is not going to add anyone to the existing loan. You may have to show this as a sale, by creating your own purchase contract, showing for the price of $x.xx (minimum of $1.00), he sold his ownership in the property to you.

If you want to research more - similar to what happens with chapter 7 bankruptcy prior discharging missed payments when a property is underwater. Your father is still be liable for the bank's lien until the loan is satisfied. If he stops making payments, the lender can still foreclose.


Good Luck

[jackmichigan]

Originally Posted by Cabowabo07

I'm really not sure if I'm doing the right thing...

There are so many questions raised by your post that no one here will be able to give you appropriate advice. Your situation really calls for the involvement of an experienced attorney.

The underlying question is whether this is an attempt to hide assets or divest assets prior to a divorce decree. If so, the entire situation is problematic. And if the wife is on the title (or even if not in some states), this whole discussion could be a moot point.

If it is planned as a legitimate transfer, how is it that the group members wish to hold title? Will it be Joint Tenants with rights of survivorship, Tenants in Common, or maybe even through another arrangement such as an LLC? What if there are disagreements among the three owners? Are you prepared for the anguish and legal expenses which may result?

How you finance the transfer seems to be a lesser matter. You may be able to assume the mortgage (although unlikely) or you may need to simply get your own financing. By the way, this is NOT an "arms-length" transaction since it is between family members.

[Jkgourmet]

Best course of action = Don't do this.

Second best course of action = Consult an attorney.