Potential problems if brother gets the mortgage

6 Replies

Hi,

I found a condo for an investment with tenant already in placewith a lease till 2019. My problem is that I cannot get conventional mortgage because I am only 3.5 years after foreclosure of condo in Florida. I spoke to my brother who has perfect credit and he is willing to help.

What is the best way to go ahead with this investment?

1) Can he just co-sign the mortgage? I would be the owner on the deed and do taxes for this investment property, and be responsible for any tax on capital gain when I sell.

2) OR the only way would be if he purchases the condo for himself?

3) What other potential issues I should be considering?

Thank you for any guidance in advance!

A possible scenario is him buy it, then sell it to you subject to the existing mortgage. That will cost you two closings though. Or have him buy, put the condo in an LLC, and then you buy him out of the LLC. Either way, he would have to be the original buyer to get a conventional mortgage with his credit.

@Marcin G. You can't be on any mortgage, conventional or portfolio. You can try to buy it with your brother in a LLC owned by you and your brother. Find a portfolio lender that will do the loan based on only one of the partners, i.e. your brother. That way you at least get half a deal.

Keep in mind, if you don't partner then you loose the entire deal. Half is better then zero.

Thank you for the info! I would like to dive in a bit more into this:

If he just buys the condo, and then when I qualify could we refinance into my name I hope minimizing costs when comparing to two closing costs? 

Regarding LLC - I like this scenario, but not sure if we could get a mortgage for a new LLC, but I will ask.

I also fund a broker that prequalified me for Portfolio Mortgage, but rate is %5.25 and 2 points. I am also considering this option with the plan of refinancing as soon as possible.

What do you think would make for the most cost effective plan?

1) He buys it, then refi or I buy from him 

2) We form LLC, get mortgage under LLC and then I buy him out

3) Portfolio mortgage and then refi

Your brother is tying up his money at a cost so the best/fairest is to have a partnership agreement. You pay him rent, cover the mortgage plus all his costs including lost income on his money, when you are able buy it from him for what he paid.  

However you would be financially way farther ahead if you stayed renting until you are qualify to buy yourself. 

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