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My parents would like to move to El Paso, Texas from New Jersey. They applied for a loan but were told that they might be able to get a loan approved if they did it as a second home or investment home. It turns out they weren't able to because their debt to income ratio is too much and they don't have jobs lined up there as a first home.
However, I was able to get approved for a loan to El Paso while working in NJ as a second home. I had initially offered to take out the loan under my name and then sell the house to my parents and within a year they would get jobs and increase their credit scores to get a good rate.
But now I'm feeling somewhat weary about going through with it because selling a home I would only be able to give them a portion of the downpayment called, "a gift of equity" and would have to make sure that everything is done properly by hiring a real estate lawyer. It seems more complicated. Especially if I can't sell the home to my parents if they don't qualify for the loan in order for me to purchase a home for myself later own the lane.
I just wanted to know if anyone has been through this process and perhaps its not as complicated as I think it is. And is a relatively easy transaction, I've been told that by my sibling and parents that I'm worrying too much. Any advice, would be great!
Then why did they apply for a second home mortgage, that makes no sense, aren't they harder to qualify for? Honestly if they can't get a mortgage on their own, then let them wait until they can.
My parents would like to move to El Paso, Texas from New Jersey. They applied for a loan but were told that they might be able to get a loan approved if they did it as a second home or investment home. It turns out they weren't able to because their debt to income ratio is too much and they don't have jobs lined up there as a first home.
However, I was able to get approved for a loan to El Paso while working in NJ as a second home. I had initially offered to take out the loan under my name and then sell the house to my parents and within a year they would get jobs and increase their credit scores to get a good rate.
But now I'm feeling somewhat weary about going through with it because selling a home I would only be able to give them a portion of the downpayment called, "a gift of equity" and would have to make sure that everything is done properly by hiring a real estate lawyer. It seems more complicated. Especially if I can't sell the home to my parents if they don't qualify for the loan in order for me to purchase a home for myself later own the lane.
I just wanted to know if anyone has been through this process and perhaps its not as complicated as I think it is. And is a relatively easy transaction, I've been told that by my sibling and parents that I'm worrying too much. Any advice, would be great!
What about if you purchase the home in El Paso then rent it to your parents and have them pay the monthly rent that's equivalent of your mortgage payment?
This way, they don't need to qualify for a loan. You can consider your parent's house as your investment property for the long term. In addition, you can take the tax write-off as a rental property and, depending your current income, it may reduce you overall taxes. Every time you fly to El Paso to visit them it's considered legitimate business expense that you can write it off (air fare, car rental, even hotel and meals).
Later, if you want to buy another property. They will take 70~75% of your rental income as part of your overall income in determining your DTI ratio. So it will not significantly affect your qualification for buying another home.
OP~ Let your parents move to El Paso. Let them rent a place there. While it's a nice gesture to buy a place, to rent to your parents, it might not be wise, due to your parents not being fiscally responsible.
Now, if you want to buy a place of your own, then DO it!
You buying a house for them, may affect your ability to get another loan for your OWN home. (Unless you plan on having them, live with you, again.)
This way, they don't need to qualify for a loan. You can consider your parent's house as your investment property for the long term. In addition, you can take the tax write-off as a rental property and, depending your current income, it may reduce you overall taxes. Every time you fly to El Paso to visit them it's considered legitimate business expense that you can write it off (air fare, car rental, even hotel and meals).
Sorry, but the IRS isn't going to buy any of those deductions. If he ever gets audited it'll cost him.
Sorry, but the IRS isn't going to buy any of those deductions. If he ever gets audited it'll cost him.
IRS allows rentals to family members, its treated like any other rental would be for taxes purposes.
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