Can I buy my parents home that still got a mortgage on it? for less than it's market value?
Let say my parents house is worth $530K with a current mortgage of $200K, would I be able to find financing to buy it for say $350K. Would lenders let us do such a deal? It would help my parents they get some cash and able to live in house (2 family) without the cost of ownership and keep it in the family. And I get to own the place which I probably would not be able to afford otherwise at market value, and be nearto them with my family as well. Can such a deal be structure or is that a no go?
Thank you in advance for any advice on this matter
Thank you in advance for any advice on this matter
(1) | asked by: candide Today | share | 27 months ago | Report
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Viewing Answers 1 - 10 of 10
What should be possible would be to buy the property from your parents for an agreed upon price, use financing (a new mortgage) to secure enough money to pay off their existing mortgage, and give them back a second mortgage for the difference in the agreed upon price. Using the numbers from your example: You and your parents agree to a purchase price of $350k. You acquire a new mortgage for that amount, the funds are used to give $200k to their existing mortgage company and they receive $150k. If you wanted to give them a second mortgage for the remainder of the value that would also be possible and the terms can be whatever is mutually agreeable. You would want to use a reputable mortgage lender and real estate conveyancing attorney as well as consult with financial advisors, since there are certainly tax ramifications that should be considered.
answer by robert perrone
my question is this, My father recently passed away. the house has a reverse mortgage on it. It still about 60,000 above the mortgage debt. The house is in a very desirable area. I did get preapproval for a mortgage. what other steps must I take too purchased this house, thank you . R.P
answer by Rene Williams
I am looking for a lender that can do this for me. House is worth $250K with a current mortgage of $80K. Financing we would like $145K. My parent's will live in the house and I will own home. Gift equity downpayment. Current loan is a real estate loan (the .3 acre of property has a large mobile home on it). We want to build a house on the land within the year, but need to purchase from my parents now. Can anyone do this loan for us? Property is in Texas. My husband and I will be buying the property and we have good credit. **because we will buy the house for our parent's, it appears there is also a FNMA allowance for the loan to qualify as our personal residence since our parents will be living at the house and they qualify as elderly with limited financial means. Thanks!
Yes, We do this ALL the time. Any proceeds must go to your parents (they can do whatever they wish with the proceeds after closing) as you cannot receive any cash out on a purchase. hopefully you have the same last name as this exemption is for relatives only. Please feel free to contact me if you want to get this going. We can close FAST! thanks, Tim
Yes- that is exactly what I would suggest doing- sounds like the this will get you into the property with minimal downpayment and provide your parents with some proceeds from the sale. I have done this type of family purchase many times and it works out for both!!
It sounds to me like you need to 1) Get a mortgage preapproval to see how much you can afford to pay for this particular property (including taxes and insurance) ; 2) Review your mortgage options (i.e., if you want to do upgrades now, you would need an FHA rehab loan); 3) Possibly consider having your parents do the work first via with their own money or via an equity line/2nd mortgage which would be paid off as part of your sale. The bottom line: what you want to do can be accomplished but a lot depends on how much you can get for a loan, so you really need to start there. This topic is better suited to a conversation. I do not have anything to gain by helping you but I'm okay with that. If you have more questions, feel free to call me directly. This is not a self-promotion tactic! There's just too much you need to know about your different options of handling this and, honestly, it's way too much to type. Besides that, I love helping first-time homebuyers! If I don't hear from you, I wish you the best of luck.
answer by candide Today
Thank you both for your answers. @ Loreen, selling the property and us buying another is not sensible option in my opinion unless we have to, since this property is in a prime location (near public transportation) in an area where housing prices as appreciated at a significant clip and is well sought after. @Mary, a gift equity is what I have been reading up on quite a bit, it looks like this is something if structure properly might work out very well for us. our thoughts is to find out a sensible amount of financing we are able to carry (don't want to be house poor) and at the same time get some cash out for my parents and to do some work in the property as well if possible. My train of thought is to have us agree on a sell price, take a mortgage that can give them an agree catch amount and any extra to put back into the property to do some remodeling. ( trying to avoid a second mortg) an hypothetical example of this would be: House appraise @ $500K, mortgage (s) @ $200K than agree sell price of let say @$350K. In such scenario $150K would be a gift equity which could help us not having to make a down payment from our own pocket if accepted by lender (our tax adviser from what I've read can mitigate any tax issues by applying it to the lifetime tax exempt for them from which they can gift to a child or family member) since it would be above the 56K they able to gift to us in a calendar year. This represent a net gain for them of $150K minuses any taxes, fees etc. in which i can help pay some of these for them anyways from the money I've been saving to buy my own place. Such situation would allow them to live in one of the apartments at no cost (2Family) and myself in the other. This would work great for us, because I will have them near as I look to start a family in the near future this would be a great help and also for me to look after them as they get older. (not counting other benefits in term of assistance and health benefits help they might be able to get once they no longer own the property and having assets in a trust down the line if needed) This seem very convoluted but would you consider this a doable option? Thanks again. PS. our credit are in the 730-750 range
yes. Your parents house already have enough equity. They owe $200,000 and its worth $530,000. You could buy it for $350,000. Which means you pay off the their balance of $200,000. The only time it would be an issue is if the house mortgage is $350,000 and your trying o purchase for $200,000. Good Luck
Yes, you can buy your parents' home for below market value as long as their current mortgage is below the price you are paying for it (which it looks like it is). Just make sure they don't have a second mortgage or equity line because that would also need to be paid off at your real estate closing, as well as any liens against the home like taxes, water bill, etc. Plus your parents will have some other expenses associated with selling the home to you in the process. They will need to pay for a new deed, for example, and an inspection by the Fire Dept to make sure all the smoke certificates and carbon monoxide detectors are the correct style and in the proper places throughout the home. The largest expense is Massachusetts' real estate transfer tax, called the stamp tax. In most counties in Massachusetts, the tax is $4.56 per thousand, but some are higher. There will also be some other fees associated with the sale which the attorney can go over in detail with you. You will still need a downpayment to get a loan to buy their home and your credit must be good. There are several first-time homebuyer mortgage programs available which allow lower downpayment amounts, maybe 3% or 3 1/2%. You should contact a mortgage professional regarding the programs available. If you don't have the downpayment, you could sell this home at the current market value then buy another (with your parents' help) and take them with you. If you have additional questions, please feel free to contact me. Best of luck to you and your family!
The answer is yes you can but it does depend on how much money you put down. You could structure the purchase with a gift of equity from your parents as well which could act as your downpayment on the home.
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