Rental Property Investor · Alexandria, VA · Member since 2015 · 26 posts · 2 votes
Hello everyone,
Mother in law has a condo in CT with about 37K left to pay on it, nearby similar condos have been appraised at around 90K to 140K. My wife and I are trying to find out the best way to take over the loan or buy the house since her mom has gotten sick and is getting partial disability but cannot cover the mortgage and cost. Currently she is paying $900 mortgage @ 8% APR (bought back in the day and never refinanced). I've ran the numbers and I can get the mortgage with HOA/insurance/taxes to 400-550 with 8K downpayment. What is the best way to get control of the property and save some cost? Could we get her to transfer the home to us and we refinance (f possible avoiding closing costs)?or do we just have to do it through a Real Estate agent? I am pre-approved for the loan amount and if anyone has any advice it would be greatly appreciated. Thank you.
This is the home that mom currently lives in, right? And you're taking it over to provide her with housing?
If so, 3 words: Gift of Equity.
Go find a local lender familiar with the nuances of gifts of equity AND the "principal residence guidelines apply if..." exceptions for if/when you are providing housing for a disabled/sick/retired parent (which you ARE doing it sounds like, so this isn't being sneaky or fraudulent). You're going to want to layer these two things: the GoE and principal residence exception for disabled parent. These two things together are going to get you the lowest rate possible and keep your funds liquid, without incurring mortgage insurance.
There are tax implications of gifts of equity you should look into, but most folks here would say that keeping as much liquid as possible is a priority for a RE investor.
This is the home that mom currently lives in, right? And you're taking it over to provide her with housing?
If so, 3 words: Gift of Equity.
Go find a local lender familiar with the nuances of gifts of equity AND the "principal residence guidelines apply if..." exceptions for if/when you are providing housing for a disabled/sick/retired parent (which you ARE doing it sounds like, so this isn't being sneaky or fraudulent). You're going to want to layer these two things: the GoE and principal residence exception for disabled parent. These two things together are going to get you the lowest rate possible and keep your funds liquid, without incurring mortgage insurance.
There are tax implications of gifts of equity you should look into, but most folks here would say that keeping as much liquid as possible is a priority for a RE investor.
Correct this is where she currently lives and the plan is for her to continue to live there. she had a heart attack recently and is on disability. This sounds like what we are trying to do and I am going to make some calls to lenders, research gift of equity and go from there. Thank you for the advice I really appreciate it. @Chris Mason
If I were in your shoe, I will simply buy the house from her using a simple purchase agreement. If you ask a CT real estate agent, you can easily find one that would give you a free copy as a courtesy. Don't need a real estate agent, nor a lawyer. Just find a lender to qualify you for a loan. If you want to be 100% sure all "i' and 't" are checked, get hold a local escrow company who can handle the transfer and recording of deed for you for a few hundred dollars.
I've been calling lenders left and right and they all seem to not know about "exceptions for if/when you are providing housing for a disabled/sick/retired parent". Do you know how I can point the loan officer in the right direction (where you got this information) or do I need to talk to an underwriter? Again thanks for the help.
Gifted equity is known as an equity credit. A FHA borrower may only receive equity credit from a family member who is selling his property to the borrower. The seller must be related by blood, marriage or law or demonstrate a long-standing, family-type relationship to gift equity to the borrower. Equity credit is used to meet the down-payment requirement for the home's purchase, its closing costs and reserve requirements. The donor sells the home to the borrower for less than the home's fair market value, giving the borrower instant equity.
It sounds like the hoa and taxes are the main part of the loan but to refinance her loan down to $400 a month would be great . Did you talk your Moms current lender ?
Maybe someone with more experience can chime in on this idea;
How bout quit claim yourself on title and moms off. Keep paying for mortgage but prepare for due on sale Clause. But as far as I know, most lender just care about being paid on time. Isn't that a WS technique?
I've been calling lenders left and right and they all seem to not know about "exceptions for if/when you are providing housing for a disabled/sick/retired parent". Do you know how I can point the loan officer in the right direction (where you got this information) or do I need to talk to an underwriter? Again thanks for the help.
I see how it is, I gotta do the jobs of lenders in North Freaking Dakota now! :)
Here you are, from Fannie Mae with your name on it: https://www.fanniemae.com/content/guide/selling/b2/1/01.html#Principal.20Residence.20Properties
If the parent is unable to work or does not have sufficient income to qualify for a mortgage on his or her own, the child is considered the owner/occupant.
EDIT: Nice, it posted. Ya, "child is considered the owner/occupant." That's you. Owner/occupant guidelines apply verbatim, period. That means you get the low down payment stuff that Fannie offers (Fannie has a 3% down and a 5% down option. FHA is not Fannie Mae, so you house hackers calm your t*ts. :P ), but you do NOT get rental income offsetting PITI. You have to be able to afford to support mom on your own, without help from mom.
Dude you are awesome! Being a newbie in real estate I tried looking for it before asking on here but came up with nothing. Thanks for the help I'm gonna get back to bugging the lenders.