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Old 12-01-2009, 07:33 AM
 
66 posts, read 187,648 times
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My wife and I will be purchasing our first home in April when she finishes school. The DIFFERENT part about our situation is that we are purchasing the house from my father. It was my grandmothers house that was willed to him when she passed.

He had it on the market for 8 months or so with 3 bids but nothing serious. So he is going to sell it to us in April for $200,000. I was pre approved for a mortgage of $200k but they want 10% down or $20k. I really only want to put $15k (which would make it a FHA loan) down so I have a larger reserve of money incase I need it.

What can I expect to spend for the closing costs? We are not using a realtor, and I am not getting the house inspected. One of the people who placed a bid got the house inspected and there was no problems.

What advice would you give us?
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Old 12-01-2009, 01:42 PM
 
Location: Plano, Texas
1,675 posts, read 6,653,446 times
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FHA loans will allow as little as 3.5% down or $7000. Buying the home you will have to pay for 1 years insurance up front and set up an escrow account for taxes and insurance with 3 months of the payments.

closing costs vary by state but i would think they would total about $3000.

If you want to limit the cash to close, write the sales contract for $205,000 and have your father donate $5000 back to you at closing to cover the closing costs and prepaids(insurance and taxes).

If you buy for $205,000 and he gives you $5000, he still ends up with the $200,000 agreed upon price and you lowered the amount of cash you need to close. I am a big fan of showing clients how to get into the home with as little cash out of pocket. I do this because once you buy a home, there will be many things you will want to and have to buy such as new door knobs, ceiling fans, lights, ect... so the more cash you have left over the less likely you are going to get into credit card debt.

Hope this helps.
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Old 12-01-2009, 01:53 PM
 
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I would think the bank would require an inspection and appraisal before giving you a mortgage, no?
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Old 12-01-2009, 02:15 PM
 
66 posts, read 187,648 times
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Hey Victor, thanks that sounds like a good idea.

Ceasach- I only got preapproved for a loan as of now so nothing is really even close to being finalized. But the loan officer did not mention anything about appraisal or inspection.
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Old 12-01-2009, 02:44 PM
 
Location: Atlanta Ga
64 posts, read 183,568 times
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Quote:
Originally Posted by MattNJ View Post
Hey Victor, thanks that sounds like a good idea.

Ceasach- I only got preapproved for a loan as of now so nothing is really even close to being finalized. But the loan officer did not mention anything about appraisal or inspection.
If you decide to go either way, your lender will probably require an appraisal at your expense, but the inspection is your call....
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Old 12-01-2009, 02:53 PM
 
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Good luck with your purchase, Matt! Hope it all works out well for you.
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Old 12-01-2009, 02:56 PM
 
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Does dad NEED the cash? If the house was owned by grandma free and clear and dad can live without a big pile of cash all at once I would STRONGLY encourage you & him to structure this as owner financing, giving him a 30 year stream of principle and interest that you can avoid any PMI, fees, appraisals or other BS. As long as the title is recorded properly and the record of payments is done in a businesslike manner this could a HUGE plus for both of you. Should something change in the future you could refi when your equity is greater and then give him the great big pile of cash...

I have helped a handful of buyers & sellers do this and if everyone is capable of treating the business aspects of this appropriately it works quite nicely.
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Old 12-01-2009, 03:14 PM
 
66 posts, read 187,648 times
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Hey Chet,
the house is paid off and lean free. My dad recently retired so he wanted to sell the house to help pay of his current mortgage. Although your idea sounds awesome for me, how would this be beneficial for my dad? I am asking just so I know how to present it to him. Thanks!!

Reps for everyone for the help. Thanks!
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Old 12-01-2009, 03:15 PM
 
66 posts, read 187,648 times
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ALSO- Would we be eligible for the 8k tax credit even though we are buying the house from my dad?
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Old 12-01-2009, 03:29 PM
 
Location: Plano, Texas
1,675 posts, read 6,653,446 times
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Quote:
Originally Posted by chet everett View Post
Does dad NEED the cash? If the house was owned by grandma free and clear and dad can live without a big pile of cash all at once I would STRONGLY encourage you & him to structure this as owner financing, giving him a 30 year stream of principle and interest that you can avoid any PMI, fees, appraisals or other BS. As long as the title is recorded properly and the record of payments is done in a businesslike manner this could a HUGE plus for both of you. Should something change in the future you could refi when your equity is greater and then give him the great big pile of cash...

I have helped a handful of buyers & sellers do this and if everyone is capable of treating the business aspects of this appropriately it works quite nicely.

What a good idea.
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