Hard money loan on foreclosure to mortgage with a co-borrower

7 Replies

Hello,

My partner and I are looking to buy a house at foreclosure. We'll use a hard money loan to acquire the property but then put a mortgage on it. We have the pre-approval ready to go but with my parents as co-borrowers. When we purchase the house at auction, do my parents need to be there and on the title then, or will they only be a part of the mortgage process?

Not clear if you mean you need your parents for the HML, or the later "mortgage". They generally won't have to be on title to "cosign" for a loan.

But curious....are your foreclosure auctions not "cash on the barrel head" or 24 hours later? Never seen a HML lender be able to do this, unless you have 15-30 days to pay the full bid price.

Hi @Wayne Brooks ,

my parents will be on the mortgage, but they will be out of town during the auction so they can't participate in any of that process. This will be our first auction, but as it has been described to me, the HML pays the full amount, then within 24 hours we put on the down payment. After that it would be monthly payments until the house gets put on the mortgage. So I am just wondering if there are any issues regarding bringing on an additional party to the mortgage. Basically X + Y get a HML and house. The mortgage clears the HML and would include XY+Z borrowers. Any legal or tax issues to add Z at that stage?

@Lalainya Rawlings You need to discuss all this with your HML. I thought you first meant that you were using hard money to buy, then shortly afterward refinancing out out that loan, with your parents, on a new loan to pay off the HML, but it doesn't sound like that is true? Never seen a HML put out the money, then wait til "later" to have a mtg executed.

Also, your comment of "as it has been described to me", troubles me. Have you been talking Directly to the "hard money lender" that is offering this? If so, your HML should have been able to answer these questions, along with what Exactly they reiterated and Exactly how the process would work. Do you know Exactly how the auction process, and titling works there? Here at live auctions the bidder declares what names the property will be titled in at the auction...not everyone needs to be present.

I know what you're talking about, and that's because buying at the auction with a HML is pretty specific to our state.

Are you purchasing a primary residence at the auction, essentially? Or would this be an investment property? Keep in mind that during the time the HML carries the loan, you cannot occupy the property (and they make you sign a statement to say that you do not intend to occupy it as a primary).

Also be careful because some HML won't let you buy in your personal name (i.e. only in entities).

I'd actually talk to your conventional lender first and get pre-approved.  And ask if your parents need to be on title to co-sign the loan.

And be very, very careful at buying from the auction.  Oftentimes, things are not what they seem to be, and half the time you're stuck with a squatter that you have to get out of the house.  Don't completely trust these auction-bidding companies and what they say.

Thanks guys for the info! @Nghi Le The plan was to buy the property as a primary residence; thanks for alerting me to the stipulations surrounding that option with HML (Eastside Funding is the lender for that). Do you happen to know if it's the same case if the purchase is a multifamily unit? Or would we plan to just not occupy the property until the mortgage came into play?

Originally posted by @Lalainya Rawlings :

Thanks guys for the info! @Nghi Le The plan was to buy the property as a primary residence; thanks for alerting me to the stipulations surrounding that option with HML (Eastside Funding is the lender for that). Do you happen to know if it's the same case if the purchase is a multifamily unit? Or would we plan to just not occupy the property until the mortgage came into play?

The good news with Eastside Funding is that they will let you borrow in your personal name; I've done this before with them.  Anything with 1-4 units is treated the same.  But you probably can't live in it while they are your lender (I remember signing an agreement about that).  Of course, things could have changed since I used them, so don't take my word as truth and always verify.  A common theme for anything real-estate related :-)

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.