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My mother is facing foreclosure on her home in June and I am attempting to purchase it to save the $120K of equity she has in it. Planing to buy it at $200K. In this situation she will gift me the down payment of $40K (out of the proceeds), however the mortgage company says that they need proof that I can pay the closing costs, which should come in around $9K. I can get a loan from a friend, but according to the mortgage company any large deposits into my account need to come with a gift letter. My friend and I are hoping to avoid having to lie and stating that it's a gift, when truthfully it is not. Here's my question, if I draft up a sale contract in which I state that the seller will pay all closing costs, should that absolve me of proving that I have assets to pay them? My loan officer didn't mention this option which implies to me that they won't accept it. Are they being unreasonable in requiring me to pay the closing costs rather than taking it out of the sale proceeds? I'm just not sure how typical it is for the seller to pay CC... Any advice would be very much appreciated.
They are trying to make sure that you have the funds to make the payments once the purchase is complete, they want to avoid foreclosure again if possible. I doubt they will allow this. I am surprised they will even allow any gift funds. If you do not have the money to pay closing, they may be well justified in their position and this may not be the right thing to do for you.
Note that I am not an expert, but I bet some more knowledgable folks will get on here and give you better answers.
I would think that whomever you use your lender/broker would help you with this task as when I went through the home buying they helped me out as far as deposits of large amounts and gifts and what not.
Thank you all for taking the time to reply. Here's a little more background info for reference. I'd be taking out a loan of $160K to buy the house, but we're setting the purchase price at $200K to include the gifted down payment. From the proceeds, my mother will pay off her mortgage of around $80K, pay around $20K of credit card debt, and then (hopefully) the closing costs, leaving around $50K of extra cash for her. We're planning to place about half of this (around two years of payments) into a separate account from which mortgage payments will auto-debit. They can count most of this as "rental income" for me which will help me qualify. I make $40K/year, have about $200/month in student loan obligations and my credit is 798, but all of my meager savings has gone to my mom for living expenses, and I can't afford to pay the closing costs. My mom has unfortunately been out of work for quite a while and her credit is pretty beat up, so I don't see how she can qualify for a refinance even if I cosign. Plus she needs some extra cash buffer since she's still out of work. Buying her home seems like a reasonable solution for us as it gives her access to liquidity and minimizes my risk (price could drop $40K if I need to sell it), but the closing costs are proving tricky. Based on this additional information, do you guys agree that they should still require me to pay them instead of taking them out of proceeds? Just trying to come up with all of my options.
Just in case anyone's curious, it turns out that we can just stipulate in the sales contract that the seller will pay the closing costs, and that will do it. Thanks for your help,
Thank you all for taking the time to reply. Here's a little more background info for reference. I'd be taking out a loan of $160K to buy the house, but we're setting the purchase price at $200K to include the gifted down payment. From the proceeds, my mother will pay off her mortgage of around $80K, pay around $20K of credit card debt, and then (hopefully) the closing costs, leaving around $50K of extra cash for her. We're planning to place about half of this (around two years of payments) into a separate account from which mortgage payments will auto-debit. They can count most of this as "rental income" for me which will help me qualify. I make $40K/year, have about $200/month in student loan obligations and my credit is 798, but all of my meager savings has gone to my mom for living expenses, and I can't afford to pay the closing costs. My mom has unfortunately been out of work for quite a while and her credit is pretty beat up, so I don't see how she can qualify for a refinance even if I cosign. Plus she needs some extra cash buffer since she's still out of work. Buying her home seems like a reasonable solution for us as it gives her access to liquidity and minimizes my risk (price could drop $40K if I need to sell it), but the closing costs are proving tricky. Based on this additional information, do you guys agree that they should still require me to pay them instead of taking them out of proceeds? Just trying to come up with all of my options.
Thanks,
What you are describing is a really, really, bad deal for you...not so good for mom either. I wish you the best of luck, but really think this will repeat itself in 2 years or less w/ your neck in the noose.
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