What kind of mortgage to get? (loan, credit score, financing, loan)

[elikhom]

Hi,
I'm confused about the different types of mortgages available and what would be the best to use in my case.

My parents who live abroad want me to buy a home for them in Miami,FL. They know what house they want since it's only a block away from my uncle's. But I live in Chicago, IL. I was told that it would be better to get a mortgage from an LO located in FL to avoid hassles, and that's fine for me.

1) My biggest concern is that I don't own a house right now, I never intended to stay in Chicago for long so I didn't buy one, but I'm planning to buy one next year IF my wife and I move to another state (not FL). In case I go ahead and get the house for my parents, will this have a negative effect on a mortgage application next year or the near future?
2) I read that there are different kind of mortgages, what type of mortgage is more appropriate for me in this case? I'm not planning to rent the house although it can be arraged if there are any advantages in doing so, and will make a sizable down payment, since my parents will refund me the money once they get rid off one of their properties abroad. Is it better to set if as owner occupied or as investment? What repercussion will this have later on my credit score?
3) Let's say I go ahead and get financing, give a 20-30% down, and after a few months or within a year my parents want to pay it off. Will it be better to prepay the mortgage I got and transfer the title to them or it would be better to "sell" them the house and they prepay their mortgage, any of these two option have any negative effects of my score?
Thanks

PS: Oh, and I don't qualify for the $8K tax credit, so let's leave that one out of the equation.

[chet everett]

In simple terms it is always best / easiest for the people who will live in a home and be responsible for the payments to get the mortgage on their own. To do otherwise will complicate matters greatly. In your case, where you are considering moving and needing to buy a home for yourself after getting a place for your parents serious issues would impact your credit, as well as legal issues of ownership, and tax issues.

You should not attempt to purchase on home as an investment property unless you are fully aware of the downsides and potential upsides. Again, in your case it certainly seems far more appropriate for you to consider your parents the owners of the house in FL, if you need to talk to a lender about your parents assets you really will need to have all your ducks in a row as well as their's. If you do not have accurate and complete data about your parent's assets and the legal right to discuss this information you will come off as a 'flake' and any sane lender would not want to move ahead with you. If your parents' assets are considerable (well into the seven/eight figures of US equivalents) you may be a good candidate to worth a bank's "private wealth management" to assist in structuring things. If they do have assest that are not quite that high you will probably need to do much more on your own. Unfortunately the number of lenders that have been badly burned by no-document mortgages means that you will be required to present much more information to prove the credit worthiness of your parents. This is even more complicated by your parents being abroad, as the risk to lender is FAR greater...

If you are considering the various trade-offs of your parents using their assets to pay off a mortgage early vs buying your house and paying off your mortage you need to investigate the kind of loan you have as well as what loan they may get to purchase their home. It is not at all difficult for them to get a new loan that has no prepayment penalty, however if they have the ability to own their home free and clear I would strongly recommend against getting any loan as the initial costs associated with the mortgage would be a considerable sunk cost that could perhaps be avoided by merely structing the sale of their home abroad and delaying any purchase until they are here.

Good Luck!