Can I live is a second mortgage on a purchase outside the state?

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I want to help my parents buy their first home, but because they can not have a good credit rating, I wanted to help. How can I do that?

2 Comments
  1. Reply
    daeve930
    February 16, 2011 at 4:12 am

    The first thing to do is check their credit scores. I use annualcreditscore.com, and you can order each of the three major bureau reports there. You have to pay for the score. I think one is $ 5.95 and the other 2 are $ 7.95. Don’t buy any other services from them. What they call debt analysis is something you can do in seconds for free. Just add up all your monthly payments from the reports, and divide by the monthly gross. That’s you debt to income ratio and what they call debt analysis. Most lenders will line up all three scores for all the borrowers and use the lowest middle score.

    Yes, you can get another mortgage if you credit is adequate and your debt ratio works. Depending on the lender and your credit score, your debt ratio can be 45% or 50%. Add up what’s on your report, and include the new mortgage payment. Here’s a mortgage calculator to figure out the payments — does not include taxes and insurance, which will probably be part of the payment, so include those.

    http://www.mortgage-calc.com/mortgage/simple.php

    The next thing is that lenders don’t really like non-resident co-signers. I work for a very big lender and we just don’t do co-signers. Your parents would have to most likely qualify on their own credit and income. You may have to purchase the home as either a second home or investment property. They may consider it a “kiddie condo” which refers to the property you buy for your kid to live in while in college, but sometimes they’ll do it for parents too.

    One other option to consider, assuming your parents are both at least 62 years old, might be a reverse mortgage purchase. My bank does a lot of reverse mortgages, but not purchases. Try Wells Fargo, they may do them. You’d have to make a hefty down payment, about 50% or more, but there would be no requirements for income, credit score, assets, debt ratio…only their ages, they’ll use it as primary res only, the house is a 1-4 family, condo or FHA acceptable manufactured home (no mobile homes, double wides unless you also own the land, or co-ops), and they have enough equity. A person who’s 62 is eligible for maybe 55% to 60% of the value of the home because closing costs are pretty high on these and most people will finance them.

  2. Reply
    Paul in San Diego
    February 16, 2011 at 4:32 am

    You and your parents should contact a mortgage broker to find out what they can afford on their own, and then what you can do (if anything) to help them. A mortgage broker will look at their assets, debts, and income, and determine what they would qualify for and how much they would have to put down. He will then factor in what would change – if anything – if you were to cosign with them (and he could tell you if that is even allowed out of state from your parents).

    Also, mortgage brokers get rate sheets from many lenders that include a large variety of loan products available. This is better than a particular lender, who will only know what their particular loan products are. And, different lenders might have different requirements for qualifying for the different loan products.

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