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I am living with my Father. My mother passed away a few years ago, and his debt has piled up. His credit score is pretty poor right now. They owned the house outright, although it is not in the greatest shape. Unfortunately a few issues have popped up on the house which may require some money to fix.
Our thought was for me to get a mortgage on the house, use some of that money to pay off both his and my bills, and put the rest into fixing the house up. The problem with that we just discovered is that I would need to be added to the deed for at least 6 months before I could get a refinance mortgage on the property.
Another idea we had was for him to sell the house to me and set him up with a life estate so he is protected in the house. The problem there is, I do not have the money for a downpayment.
My question is, could he sell me the house for an amount less than what the house is worth, and would I be able to get a mortgage for that full amount without the down payment? If not, is there a way to make this work?
Yes, he can sell you the house and gift you 20% in equity that will take the place of a down payment:
200,000 sales price and appraised value (40,000) .20% gift of equity
160,000 loan amount for you and sales proceeds for your Dad's pocket (minus some "small" seller costs
You could go one step further and have the seller (aka Dad) pay for your closing costs too. You could literally purchase the home with Zero cash. This all assumes there aren't major obvious repairs needed where the property cannot be approved "as is". You would be a 20% down conventional buyer.
I am living with my Father. My mother passed away a few years ago, and his debt has piled up. His credit score is pretty poor right now. They owned the house outright, although it is not in the greatest shape. Unfortunately a few issues have popped up on the house which may require some money to fix.
Our thought was for me to get a mortgage on the house, use some of that money to pay off both his and my bills, and put the rest into fixing the house up. The problem with that we just discovered is that I would need to be added to the deed for at least 6 months before I could get a refinance mortgage on the property.
Another idea we had was for him to sell the house to me and set him up with a life estate so he is protected in the house. The problem there is, I do not have the money for a downpayment.
My question is, could he sell me the house for an amount less than what the house is worth, and would I be able to get a mortgage for that full amount without the down payment? If not, is there a way to make this work?
Be very very careful. If you have not been able to save money in all these years, why will you suddenly have the extra cash flow to make payments on a loan that you did not have before?
Until the house is in your name, making payments on it using your money is a big gamble, and if your dad ends up needing assisted living the state may try to take the house away...leaving you with nothing to show for the payments you made. Also if your dad sells it to you below market value and needs Medicaid long-term care within the 5-year look-back, you may be forced to sell the house to recoup the difference, because your dad will have legally gifted you the amount of the discount. Talk to an estate planner in your state for details.
Yes, he can sell you the house and gift you 20% in equity that will take the place of a down payment:
200,000 sales price and appraised value (40,000) .20% gift of equity
160,000 loan amount for you and sales proceeds for your Dad's pocket (minus some "small" seller costs
You could go one step further and have the seller (aka Dad) pay for your closing costs too. You could literally purchase the home with Zero cash. This all assumes there aren't major obvious repairs needed where the property cannot be approved "as is". You would be a 20% down conventional buyer.
Friend just did a refi and put his kids' name on the deed with his - kid is going to pay the bills from now on - but no sale because the kid isn't on the refi - he just gifted 1/2 interest in the house.
We bought our family house. It was my great grandparents, then uncles and then ours. Somehow my grandma got it from my great grandparents who then sold it to my uncle. My uncle used the same mortgage company they did and we used them too so they knew and UNDERSTOOD what was going on. For us, my uncle only wanted what was still owed on the mortgage, so we applied for a loan for that much and went from there.
So family to family CAN be done. By a bank? I dont know. Easy? Kind of.
We bought our family house. It was my great grandparents, then uncles and then ours. Somehow my grandma got it from my great grandparents who then sold it to my uncle. My uncle used the same mortgage company they did and we used them too so they knew and UNDERSTOOD what was going on. For us, my uncle only wanted what was still owed on the mortgage, so we applied for a loan for that much and went from there.
So family to family CAN be done. By a bank? I dont know. Easy? Kind of.
YMMV
Its a boon to the kid - especially if there's other siblings involved who'll get screwed out of their inheritance. Been done - a lot. Parent can't make the mortgage and kid says - ok, I'll help you so you can keep the house but if I help you - you add me to the deed. Parent has no choice and does it - now shares home ownership with the kid - who may or may not - live up to his end by paying the bills. Other siblings will never see a penny from the house. And if the kid on the deed was married and gets divorced - she might walk away with a nice lump sum or force the sale anyway. Saw this happen where the parent gave the house to the kid outright and kept a life estate - kid died & his spouse made the parent's life so miserable he had to move out - in his 80s & of course - the other kid who got screwed didn't want him at that point. Very sad case but parents gift their houses to kids all the time in exchange for the kid agreeing to take care of the parent & pay the bills. Rotten kids also have taken out equity loans or done mortgages claiming they needed the money to fix the house, help pay their parents bills - but really - they make out like bandits because they just got a house they could never afford to buy if the parent didn't give it to them and their own debts are getting paid off - and all they have to do is take care of the parent which is something they should have done anyway.
Its a boon to the kid - especially if there's other siblings involved who'll get screwed out of their inheritance. Been done - a lot. Parent can't make the mortgage and kid says - ok, I'll help you so you can keep the house but if I help you - you add me to the deed. Parent has no choice and does it - now shares home ownership with the kid - who may or may not - live up to his end by paying the bills. Other siblings will never see a penny from the house. And if the kid on the deed was married and gets divorced - she might walk away with a nice lump sum or force the sale anyway. Saw this happen where the parent gave the house to the kid outright and kept a life estate - kid died & his spouse made the parent's life so miserable he had to move out - in his 80s & of course - the other kid who got screwed didn't want him at that point. Very sad case but parents gift their houses to kids all the time in exchange for the kid agreeing to take care of the parent & pay the bills. Rotten kids also have taken out equity loans or done mortgages claiming they needed the money to fix the house, help pay their parents bills - but really - they make out like bandits because they just got a house they could never afford to buy if the parent didn't give it to them and their own debts are getting paid off - and all they have to do is take care of the parent which is something they should have done anyway.
Yeah, I definitely see that as probably happening quite a bit. And that is a big concern of mine. I understand all the concerns about protecting the house of something should happen to him, but what if something happens to me? How will he be protected then. The lawyer and accountant think it would be wiser to put it in my name only, but I am not sure that is the right thing here.
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