Buying house for son

[nickjames]

What is the name of your state? TX.

I am about to purchase a second home that I think will appreciate greatly in the future. I want to get this house for my son, who is not in a financial position to buy a house of this value (no credit, no job, in graduate school). I do not want him to undertake a mortgage, even if I am a co-signer. Is it possible for me to be the sole person financially responsible for the mortgage payments but the house to be in his name? I apologize if this is a silly question but I have never encountered such a situation before, It was always my thought that the mortgage obligor will always be the same as the "owner" on the deed. Thanks!

 

[scarah]

My husband and I purchased our first home when we were both graduate students. Our income (from stipends and some student loans) could not be considered as income for the purpose of a mortgage and we had to get my husband's parents to cosign for us. They also had to be on the deed at the time (mortgage companies will insist on this). After closing, we all filed a gift of deed that transfered the property to just my husband and I, though the mortgage still had all four of our names on it. I would imagine you could purchase the home in your name only, and file the gift of deed after closing to transfer ownership to your son. I would double check on this with the attorney or closing company that you are using.

 

[nextwife]

Deeding it while you are on the mortgage is a lame brained idea!

Being responsible for a home mortgage on a home for which you have no ownership and no control is a very BAD idea. There are so many reason's it's a bad idea, I'm not sure where to begin. You certainly can gift in SOME day, when he's financially capable of taking over the mortgage, when it's paid off, when you die. DON"T be short-sighted- just because you CAN deed it to him doesn't mean you should, at least not while you are liable for the loan.

 

[nickjames]

What about deeding to myself AND my son? My thinking (and I know it may not make sense) is that when my son is financially capable of taking over the payments there will be less closing costs and/or other difficulties if he is already an owner??

 

[FarmerJ]

You really need to talk to a real estate atty, you can even get creative things set up where you get 60 % interest in the property with a ownership partnership agreement so that way your son cannot get any loans against the property at a later date without your knowledge. Also the agreement can spell out who will pay for what over and above the mortgage, It can even go as far as spelling out a set time for him to buy you out. Or conditions where you will turn it over to him. Also I did a brief search on common law marriage in your state, If there is any way in the next few years that your son could end up living with some one and finding later the other person attempting to make claim to the property, you can talk to atty about that. Im sure theres more reasons so use the links up top to speak to a real estate atty in your state so you can learn what your best options are to protect the investement you wish to make and how to best be able to later give the property to your son. You may love your son, but familys can become worst nightmare when it comes to this kind of thing and best way to prevent that is with every thing covered in contract type of agreements.

 

[tranquility]

The essence to most any financial transaction is the answer to the question, "What is your goal?" Goals can be complex and encompass many areas. Like the other posters, I think it is unlikely to be the best course to take on a mortgage and give the property to your child. Why? Why not make it a gift at some later time? Except for some specific factual scenarios, that is probably the best course. Why give it now? Your fear of "closing costs" and difficulties pale in comparison to the disconnect when the owner is not the one who is liable for the loan.

 

[nickjames]

Thank you for the good responses. I will have to sit down and decide the best course of action. It sounds like giving up complete ownership is a questionable idea. One last question, is it possible to deed the house to myself and my son after closing? In Texas, which is a deed of trust state, what would be the effect of recording such a deed with both of our names when the deed of trust would be in my name only?

 

[lcannister]

Being responsible for a home mortgage on a home for which you have no ownership and no control is a very BAD idea.

In addition I wonder what the bank would say about you GIVING away the collateral on the loan they carry? Usually when you gift something you and not the bank owns it!

See an Atty, this is an awful idea.

 

[LindaP777]

In Texas, which is a deed of trust state, what would be the effect of recording such a deed with both of our names when the deed of trust would be in my name only?

Deeding the house into another person's name could trigger the "due on sale clause" in your mortage.
Your mortgage company would be a good place to start asking questions. On lender I deal with allows you to assign the assumable mortgage to a relative (I thought that was a neat selling point) with no closing costs to that person.

 

[nickjames]

I understand that if I gave up ownership it would be a dumb idea. I would still like to know what would happen if I deed is to myself and my son. Would this not be a better idea than cosigning and having my son saddled with a huge debt on his credit report? This way he is technically an owner but I am liable on the note. And with regard to the due on sale provision, it is my understanding that federal law allows for transfers to a relative, meaning an outright transfer and not assigning the mortgage (although I agree with you that I cannot see how the lender would be ok with the collateral being with someone else). I understand that asking a lawyer would be best, and I will probably do that. The reason I am posting here is to see if my idea flat out cannot be done legally so I won't waste my time (and embarrass myself) with the lawyer.

 

[lcannister]

Still a VERY bad idea. I know that you love your son and "nothing" will ever get between you, however, it does happen then one or the other is wondering how to get rid of one or the other on the deed. Then we get into the expense of partition and time. Then we get into one or the other and their spouse's opinions...

Son can not take the tax writeoffs as the mortgage is in your name.

 

[nickjames]

That's a very good point about spouses! I have seen examples of that with others. Thank you.