Purchase/Refinance from family?

[majomom1]

What is the name of your state (only U.S. law)? MO

I am trying to buy a home. I have made a few inquiries to acquire a loan and I am confused about some of the questions and statements that have come up. Please bear with me I do not have all the terminology down yet. Any help there would also be greatly appreciated.

The home is owned by a family member who is currently in a nursing home. His property and affairs are being handled by another family member. The house was in poor shape and the family agreed to let my Dad make some repairs etc… in exchange for me being able to “rent to own” or if I did not end up buying it, he would get his money back when the house was sold. The house still needs some major work – the biggest item being that the house is on a septic tank. It is my understanding that it would have to be hooked into the city sewer before it could be listed, or sold through a realtor. Would that still apply to me, or can I just deduct the cost of that from my purchase offer?

The first statement made by all that I talk to is: that it is good that my last name is not the same. Why is that relevant? My maiden name is the same – doesn’t that usually come up on a loan application? Why does it matter if the house is owned by a family member? I want to do all of this completely legal and right.

I have been renting to own the house for a year. I have had some credit issues to resolve before I can qualify for a loan. It has been stated that since I am doing a rent to own, that I could apply for a ‘refinance’ instead of a ‘purchase’. If this is correct, then could I apply for a refinance and roll my other debt into this secured loan? The total amount I am seeking, for the house and the debt, would still leave me well below the value of the house.

Any advice or thoughts would be greatly appreciated. I am trying to put a proposal together to obtain a loan and for the family to submit to the insurance company. They apparently have to approve everything.What is the name of your state (only U.S. law)?

 

[HomeGuru]

What is the name of your state (only U.S. law)? MO

I am trying to buy a home. I have made a few inquiries to acquire a loan and I am confused about some of the questions and statements that have come up. Please bear with me I do not have all the terminology down yet. Any help there would also be greatly appreciated.

The home is owned by a family member who is currently in a nursing home. His property and affairs are being handled by another family member. The house was in poor shape and the family agreed to let my Dad make some repairs etc… in exchange for me being able to “rent to own” or if I did not end up buying it, he would get his money back when the house was sold. The house still needs some major work – the biggest item being that the house is on a septic tank. It is my understanding that it would have to be hooked into the city sewer before it could be listed, or sold through a realtor. Would that still apply to me, or can I just deduct the cost of that from my purchase offer?

The first statement made by all that I talk to is: that it is good that my last name is not the same. Why is that relevant? My maiden name is the same – doesn’t that usually come up on a loan application? Why does it matter if the house is owned by a family member? I want to do all of this completely legal and right.

I have been renting to own the house for a year. I have had some credit issues to resolve before I can qualify for a loan. It has been stated that since I am doing a rent to own, that I could apply for a ‘refinance’ instead of a ‘purchase’. If this is correct, then could I apply for a refinance and roll my other debt into this secured loan? The total amount I am seeking, for the house and the debt, would still leave me well below the value of the house.

Any advice or thoughts would be greatly appreciated. I am trying to put a proposal together to obtain a loan and for the family to submit to the insurance company. They apparently have to approve everything.What is the name of your state (only U.S. law)?

**A: you need to be talking to a mortgage broker and a Realtor.

 

[majomom1]

**A: you need to be talking to a mortgage broker and a Realtor.

Thank you. That is where I started and I have gotten either no answers or conflicting answers. The realtor refers me to their mortgage broker, then the mortgage broker refers me back to the realtor. Everyone wants to run my credit before they will even talk to me and I don't want all these inquiries on my report. I have my credit report and scores etc. There also seems to be a new question each time that I wasn't prepared for so I end up having to stop and go find that answer.

I'd just like to have some knowledge under my hat before I go in this time and be able to understand and negotiate a little better.

Again, thank you.

 

[HomeGuru]

Thank you. That is where I started and I have gotten either no answers or conflicting answers. The realtor refers me to their mortgage broker, then the mortgage broker refers me back to the realtor. Everyone wants to run my credit before they will even talk to me and I don't want all these inquiries on my report. I have my credit report and scores etc. There also seems to be a new question each time that I wasn't prepared for so I end up having to stop and go find that answer.

I'd just like to have some knowledge under my hat before I go in this time and be able to understand and negotiate a little better.

Again, thank you.

**A: then you are talking to the wrong people. Talk to other Realtor's and mortgage brokers. Get 2-3 opinions if needed before you sign anything. If they are not wiling to help move on to the next one. Currently, there are hundreds of starving Realtors and mortage brokers looking for clients. You are king or rather queen in this market.

 

[nextwife]

Does the owner have sufficient assets to pay for the nursing home care WITHOUT selling this property?

 

[majomom1]

Does the owner have sufficient assets to pay for the nursing home care WITHOUT selling this property?

So far yes. He has 401K, Retirement, VA benefits and I believe he receives disability. The house has no mortgage. The family knew I would need some time to clear up my credit and get in a position to obtain a loan etc.

The family originally got permission from the attorneys/insurance to put someone in the house, rent free, to make repairs and improvements to help bring a better price for the house, rather than take a huge loss. The insurance had no problem with me taking on that role... and I only did the 'rent free' for 6 months.

To my knowledge, there have been no problems from the insurance or nursing home and believe me, if they had a problem I would already know about it. I don't want to put any of my family in a bind, so if I can't get this all done I will move and let them get it sold. Even with the drop in the market, we have already made improvements to bring the price up about $20K.

 

[nextwife]

So far yes. He has 401K, Retirement, VA benefits and I believe he receives disability. The house has no mortgage. The family knew I would need some time to clear up my credit and get in a position to obtain a loan etc.

The family originally got permission from the attorneys/insurance to put someone in the house, rent free, to make repairs and improvements to help bring a better price for the house, rather than take a huge loss. The insurance had no problem with me taking on that role... and I only did the 'rent free' for 6 months.

To my knowledge, there have been no problems from the insurance or nursing home and believe me, if they had a problem I would already know about it. I don't want to put any of my family in a bind, so if I can't get this all done I will move and let them get it sold. Even with the drop in the market, we have already made improvements to bring the price up about $20K.

The problem is that, considering there is a five year "lookback period" regarding assets that may need to be tapped to pay one's debts and care costs, you will need to make sure that any purchase is done at current fair market value, else it may be reversed later.

You may want to FIRST verify that the family member has a valid Power of Attorney, acceptable to a title company for the transfer of real estate, executed while the owner was still lucid. And don't skip getting title insurance if you buy. Who knows whether the party really has good title.

If there is, and he concurs with you about the sale, you may wish to talk to the CURRENT lender. If they realize that he is in a nursing home, they may work with you on a rewrite or other loan so they don't get burned when he passes and stuck with the estate walking from the home.

 

[majomom1]

The problem is that, considering there is a five year "lookback period" regarding assets that may need to be tapped to pay one's debts and care costs, you will need to make sure that any purchase is done at current fair market value, else it may be reversed later.

You may want to FIRST verify that the family member has a valid Power of Attorney, acceptable to a title company for the transfer of real estate, executed while the owner was still lucid. And don't skip getting title insurance if you buy. Who knows whether the party really has good title.

If there is, and he concurs with you about the sale, you may wish to talk to the CURRENT lender. If they realize that he is in a nursing home, they may work with you on a rewrite or other loan so they don't get burned when he passes and stuck with the estate walking from the home.

Now that "lookback period" is information I am glad to have! I will get more info from the family before I finalize any of this. I was told that they could sell to me at 75% of the value. While that sounds nice - I don't want to short change my uncle in any way, or put myself in a situation where they can come back on me. I have been looking at fair market, less the costs to change the septic and some other 'major' issues that I am willing to take on myself.

There is no current mortgage, or lender. It is entirely paid off. The house was purchased by my uncle, from my Dad back in the 1970's - so I don't think there are any title issues. I believe all other debt has been resolved as well.

I will check on the current Power of Attorney. My uncle is currently lucid and still signs documents etc... he is just wheelchair bound, and unable to speak or care for himself.

Thank you. This has been very helpful. Nothing ever seems to be simple and I just want to be sure I cover all the bases I possibly can upfront.

 

[nextwife]

Will the "seller" consider carrying a mortgage, maybe on a short term balloon (say, five years) or sell on a land contract?

 

[majomom1]

Will the "seller" consider carrying a mortgage, maybe on a short term balloon (say, five years) or sell on a land contract?

I did mention an owner finance, once... the family wasn't wild about that, but I didn't consider short term. I think I should reconsider that. I would rather see the interest go to my uncle.

I have never heard of a land contract. How is that different?

 

[HomeGuru]

I did mention an owner finance, once... the family wasn't wild about that, but I didn't consider short term. I think I should reconsider that. I would rather see the interest go to my uncle.

I have never heard of a land contract. How is that different?

**A: short term should be around 5 years.