Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Lets say an opportunity to purchase a house comes up but you have to act fast. So fast that you can't sell your current house in time to use that equity money toward the down payment. Also with your debt-to-income ratio, you couldn't "carry" the new house with the old house.
Enter a co-signer. That would allow you to purchase the new house and then within a month sell your current house. The co-signer would provide money for the downpayment, and then upon selling your current house you would pay the co-signer back. The co-signer would also make your debt-to-income ratio more favorable as to allow both mortgages to be carried.
Is this possible? I know a co-signer (parent) can help with the DTI ratio... but wondering if money from a co-signer for a downpayment would be considered a gift.
Have you thought about renting your current home? I was in the same situation as you where I had to act fast on a home purchase. It was new construction and they were closing out the phase. They had an awesome lot placement that I just had to have. But I knew that I could not get my house ready in time to put on market and sell it.
I committed to the lender to rent my place for a term of 1 year and the rental income could be used toward my DTI. Basically my rental income offsets my mortgage payment except for a couple hundred.
I just couldn't deal with the stress of buying a new home and selling my current one.
As far as your down payment question, I wouldn't think the money a cosigner comes into the deal with would be considered a gift, however, if the cosigner is only going to be used to secure the loan (and not live there), that caveat may make the funds a gift. But I'm not a mortgage expert so take what I say with a grain of salt!
Congrats on your new home purchase and hope it all works out!
Yes, a cosigner can help you with ratios, that changed for Fannie (Freddie already permitted) in 2015 on a conventional loan. FHA used to be your only option until this recent change.
Cosigner is a co-mortgagor, meaning their assets would already be under consideration. But even without the cosigning, a family members may provide gifts for home purchases....... meaning, a family member can give you the money without expectation of repayment. They also must sign that repayment is not expected, not that they will advance you equity or you would pay back whenever you are able. FHA has provisions (or they did have) for closely held family loans, provided full terms of the loan do not interfere with your ability to make the new mortgage payment. The problem, FHA MI cancels out any benefit of using the program.
Considered it, but it wouldn't make a good rental property.
Quote:
Originally Posted by SmartMoney
Cosigner is a co-mortgagor, meaning their assets would already be under consideration. But even without the cosigning, a family members may provide gifts for home purchases....... meaning, a family member can give you the money without expectation of repayment. They also must sign that repayment is not expected, not that they will advance you equity or you would pay back whenever you are able. FHA has provisions (or they did have) for closely held family loans, provided full terms of the loan do not interfere with your ability to make the new mortgage payment. The problem, FHA MI cancels out any benefit of using the program.
Are there limits on the size of the gift that can be given? I thought I saw something very low like $12,000. Above which you have to pay taxes or something? I have searched the internet but couldn't get a definitive answer. I would be looking at $75k roughly. I might be able to squeeze by with the DTI ratio without a cosigner but I need the equity in my house as the down payment on the new one.
Also what do you mean by "The problem, FHA MI cancels out any benefit of using the program."?
Does this stuff change if the new house is a foreclosure?
Also if I don't go the gift route and have the person co-sign the loan, are we free to use his/her funds for the downpayment without getting in to any gift scenarios?
How easy is it to remove the co-signer in a year or so?
There is no limit on how much of a gift someone can provide for the loan, you are confusing mortgages with tax consequences.
FHA charges high rate for mortgage insurance (if you need it). Convention mortgage insurance is cheaper if you have a decent credit score.
Removing a cosigner is done via a refinance - you will have closing costs and likely lose your rate. The closer to purchasing that you refi, the greater the savings for title bring downs, etc. Most lenders will be very unhappy if you refinance within 6 months, as most pay a penalty to the investor or the employer.
There is no limit on how much of a gift someone can provide for the loan, you are confusing mortgages with tax consequences.
FHA charges high rate for mortgage insurance (if you need it). Convention mortgage insurance is cheaper if you have a decent credit score.
Removing a cosigner is done via a refinance - you will have closing costs and likely lose your rate. The closer to purchasing that you refi, the greater the savings for title bring downs, etc. Most lenders will be very unhappy if you refinance within 6 months, as most pay a penalty to the investor or the employer.
I can do a conventional mortgage on a foreclosure, is that correct? Plan on putting 20% down. Thanks for the info on refinance.
The seller won't accept any mortgage contingencies however I am trying to finance it. I have excellent credit so I'm not too worried about getting pre-approval. However what should I be concerned with in regards to the no mortgage contingencies? The fact that I won't be able to find a bank that wants to finance a foreclosure? Worse case scenario I am out the earnest money (which is a chunk of change - this would be bad)?
What is wrong with the property? Will they allow utilities to be turned on? On a conventional mortgage, the home must be habitable, and, the utilities must be on for the appraiser. This is usually the first problem. The bank will not want to turn them on (problem #1). Most contracts with financing have an appraisal clause (problem #2) and a loan contingency(problem #3). Most REO managers would rather hold out for a cash price than accept a higher offer.
If you can rustle up the cash for the entire purchase, you can do a subsequent technical refinance (which is basically a cash out refinance) to get your money back out. No additional funds (regardless of improvements) may go into your pockets - only what you have into it from the purchase and closing costs. Fannie realized that REO that was demanding cash only for purchases was stifling neighborhood revitalizations across the country and limiting investors. This vehicle allowed investors to purchase the home, fix what they were going to fix and then get their cash out, while at the same time, subtly discouraging flippers, who just want to get in, then out, as quickly as possible.
What is wrong with the property? Will they allow utilities to be turned on? On a conventional mortgage, the home must be habitable, and, the utilities must be on for the appraiser. This is usually the first problem. The bank will not want to turn them on (problem #1). Most contracts with financing have an appraisal clause (problem #2) and a loan contingency(problem #3). Most REO managers would rather hold out for a cash price than accept a higher offer.
If you can rustle up the cash for the entire purchase, you can do a subsequent technical refinance (which is basically a cash out refinance) to get your money back out. No additional funds (regardless of improvements) may go into your pockets - only what you have into it from the purchase and closing costs. Fannie realized that REO that was demanding cash only for purchases was stifling neighborhood revitalizations across the country and limiting investors. This vehicle allowed investors to purchase the home, fix what they were going to fix and then get their cash out, while at the same time, subtly discouraging flippers, who just want to get in, then out, as quickly as possible.
Thanks for the reply. I appreciate you taking your time to help!
The property is in good condition. As far as the utilities, it is usually a pain to get a bank to turn them on for an appraisal? This is a nationstar owned property. Yes there are no contingencies.
If we come to an agreement and I pay the earnest money and they are the ones who are slowing the transaction down is there any way to get that money back? For instance if I document trying to get them to turn the utilities on, etc. Also would it be crazy to make a cash offer without having the utilities on? Also how hard does it have to be to get the electricity turned on for a day!
Is a Special Warranty Deed pretty normal for a bank owned foreclosure?
I have done some title checking but if this is a bank-owned foreclosure, shouldn't the title already be fairly clear? Doesn't that happen at the sheriff sale (is that the same as a courthouse sale?)
Buying a home should be primarily a financial decision, not an emotional one. Trying to rush things before you are really ready because the "perfect house" popped up is usually foolish. There will always be other houses.
Also, using a cosigner frequently goes horribly wrong, for the cosigner. You would have to be an idiot to cosign a home loan for someone imo.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
But I knew that I could not get my house ready in time to put on market and sell it. 
