Posted on: 05th Jan, 2010 07:35 am
So My mother in law is going to retire soon. She has a home worth $124K and owes about $60 on it. We discussed paying off her mortgage because she has a 4% interest rate and currently can't qualify for a traditional loan. If we were to owner finance for what she owes and keep her current 4% rate, how will this effect us when we go to buy a bigger home a few years down the line. The plan was to owner finance and do a contract through a title company, we will continue to pay her mortage, taxes and insurance then when we buy a bigger home she will get what her current equity is and we will get a prorated amount of what we have invested.
Will this help us in a few years with a new mortgage? How does it effect our credit? Does it even effect it?
Will this help us in a few years with a new mortgage? How does it effect our credit? Does it even effect it?
she owes $60 or $60K? that's important.
Who owns the house? Who is doing the owner financing??
You said your mother is the owner. She has a mortgage. Are you saying she as the owner is going to pay off the existing loan and hold a $60,000 mortgage for you if you buy it from her??
Who owns it?
Who will be holding the mortgage?
Is the existing mortgage going away and someone is owner financing in its place?
Where is the $60,000 coming from to pay off the existing mortgage?
You said your mother is the owner. She has a mortgage. Are you saying she as the owner is going to pay off the existing loan and hold a $60,000 mortgage for you if you buy it from her??
Who owns it?
Who will be holding the mortgage?
Is the existing mortgage going away and someone is owner financing in its place?
Where is the $60,000 coming from to pay off the existing mortgage?
Perhaps would you be interested in doing a reverse mortgage? This way she can live there make no payments without going through the affordabilty test.
Laurie Reiss
Financial Mortgage Advisor
[Email address and phone number deleted as per forum rules]
Laurie Reiss
Financial Mortgage Advisor
[Email address and phone number deleted as per forum rules]
it sounds like you're trying to describe what used to be called a wrap transaction. you buy the home from your mother, you leave her mortgage in place, you write a new note that she holds that is subject to the existing mortgage note. (you owe her $60k, she owes the bank $60k, total owed is still $60k.)
or you could do the same thing where you're buying her out entirely for $120k. (you owe her $120k, she owes the bank $60k).
either way, you could be triggering a due on sale clause, which means that her note is due when you take legal title to the home. that note may not be called by the bank, but the legal possibility is there. that would mean that the home could be foreclosed on, or you would have to refinance fully in your name.
the rest of your question is about how it will affect your later home purchase. there are a couple of points to be made here.
1. if you have an owner financed note, it typically isn't reported to the credit bureaus and it doesn't help (or hurt) your credit score.
2. by purchasing and living in this home, you are no longer a first time homebuyer.
you need to clarify your intent on who is going to live in the home and who is going to be the legal owner.
or you could do the same thing where you're buying her out entirely for $120k. (you owe her $120k, she owes the bank $60k).
either way, you could be triggering a due on sale clause, which means that her note is due when you take legal title to the home. that note may not be called by the bank, but the legal possibility is there. that would mean that the home could be foreclosed on, or you would have to refinance fully in your name.
the rest of your question is about how it will affect your later home purchase. there are a couple of points to be made here.
1. if you have an owner financed note, it typically isn't reported to the credit bureaus and it doesn't help (or hurt) your credit score.
2. by purchasing and living in this home, you are no longer a first time homebuyer.
you need to clarify your intent on who is going to live in the home and who is going to be the legal owner.
well put, howard. i hope this early in your tenure as a contributor on the site that you're enthused about hanging around a while. we can use some additional help all the time, of course.
other than to acknowledge that's where you are, i won't hit on the wasilla thing at all.
other than to acknowledge that's where you are, i won't hit on the wasilla thing at all.