I need help! Is this legal?

Question

My sister found a home she likes but can't afford to pay the down payment. If I agree to buy the house with her (she and I are on the mortgage together), will that allow us to only pay 5% down? This is confusing because this would be an investment property for me (usually 20% required), but my sister is going to live in it (3-5% required).

From there, I pay for all house repairs. My sister pays the mortgage, plus $300 per month (cashflow) to me. Essentially I'm renting a property out to her that she and I "bought" together. Is this legal?

Hunter Vigneault · Answer

It doesn't sound "illegal" but ultimately it will depend on the lender. My guess is they won't like the arrangement, and if you do it without disclosing the intent then it might become illegal.

I don't know enough about your family relationship or how big the down payment is etc, but it doesn't sound like a good enough deal to be worth pursuing on your end. There are any number of ways buying a house with a family member can go sideways and that alone wouldn't be worth the $300 a month to me. Additionally, depending on the house and what counts as repairs (additional potential family stress points), $300 can get spent pretty quickly.

If she is a first time home buyer she can look into the possibility of down payment assistance programs. There are a number of states that offer them. She can also look into NACA as a potential avenue.

Chris Seveney · Answer

As Hunter mentioned depends on the lender. Just be aware this goes on your credit and later on if you are looking to buy something they most likely will not consider this a rental unless you are "claiming" the $300 cash flow. Also make sure to talk to an accountant and who gets the depreciation and how you split that up