If I did not get a mortgage, it is better to borrow money from my mother, or did they buy it for them?

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I’m between jobs and now have to buy a condo. My mother has money at hand for us to acquire. Our plan is to get a normal mortgage, when I work, then pay my mother. My question is: If my mother to buy the house in his name, then buys it from her when I’m on a mortgage or loan me the money they owe and then pay us back later reimburse the Which? so would be cheaper / easier or easier thanks to long term in terms of fees, assessments, tax obligations, etc.?

  1. Reply
    May 16, 2011 at 4:55 am

    Buy the house with your name on the deed, this way you qualify for the first time home buyer credit..
    Have a repayment contract drawn up, by a lawyer, repaying mom. Set the payment schedule monthly just as if mom were the bank. This gives mom a nice return on her investment, you your condo and the contact will ensure mom is repaid in full with at least 6% interest.

  2. Reply
    May 16, 2011 at 5:50 am

    You should really wait until you are able to purchase your condo on your own, many families have had many a squabble over finances because the family member that do the borrowing seems to think they are entitled.

    If you do decide to go through with your mother purchasing the condo and you paying her back, once the transaction had been finalized between the old seller and your mother you may make a contract on the purchase from your mother to you. This is based on the assumption that your mother will pay all cash for the sale and not use purchase the condo with a mortgage where she qualifies for, is approved for a mortgage loan thus will have a monthly mortgage payment.

    Make sure the condo is FHA eligible before you purchase in this condo complex. Also you would want to make sure that the condo association is not in any legal action, so you would want to obtain and see a copy of the Association’s CC&R plus the by-laws. Your real estate agent should be able to assist you with these documents.

    Make a contract between you and your mother as to the price you will be paying for the purchase from your mother. You would also want to establish the amount you are putting down, which would be subtracted from the sales price. Then the amount of interest you will be paying on this mortgage loan your mother would charge you, because had she left the money where it was she would be getting some type of return on her capital, therefore you should some how reimburse her at least that amount of interest. There are other things that would go into this contract like date the mortgage payment would be expected from you and any late charges or penalties to you. You would need to put in this contract a date you would like to complete the sales transaction. This is an estimate, but normally for this type transaction you might want somewhere around 15-20 days for the closing.

    Now once this contract has been signed and dated between the two of you, take this document to an escrow closing agent. In some states this is an attorney. You would also need the services of a title company.

    This escrow closing agent will take this contract, and make escrow instructions for both of you to sign. If additional information or other things are needed to complete the escrow instructions the escrow officer will request this additional information.

    Between the escrow closing agent and the title company they will ensure that all state and local laws are observed and legally performed for this transfer.

    When all is completed the escrow and title company will close the transaction. The title to the property will transfer from your mother to you. You will be required to pay the taxes as the association would collect the insurance through the association dues you will be required to pay each month.

    Once you sign all the closing documents required by the escrow closing agent and the title company you would own the condo and the title company will record the signed deed in the county recorder’s office in which the condo is located.

    You do realize that failure on your part to make the monthly payments to your mother, it would be within your mother’s legal rights to foreclose on the condo? If this was to happen any payments you made to your mother as mortgage payments would be forfeited by you.

    I hope this has been of some use to you, good luck.

    “FIGHT ON”

  3. Reply
    Big Deal Maker
    May 16, 2011 at 6:20 am

    My answer to you is this.
    If you are now out of work then it is time to hold off buying that home.
    If your mom want to play bank for you then that would be her business. However i would advise you both not to do this until you get work. And you do not need to buy a condo. You can do it when you have a job. You can ask your mom to co-sign on the home at a later date.

  4. Reply
    Barnacle Bill the Sailor
    May 16, 2011 at 6:42 am

    If you are in between jobs, then you don’t really “need” to buy a condo.

    If you insist and your mother is able to help you, then have her put it in her name. You can pay the mortgage and she can declare it to be a rental on her income taxes. The interest will be tax deductible and since she won’t be making a profit, she can declare a loss on her taxes. It’s won’t be difficult to file her taxes either. I use Turbo Tax and I have a number of rental properties.

    My mother in law was divorced a few years back and needed a place to live. She wanted to buy a home, but didn’t have the credit for it. My wife found a home that her mother liked and it was affordable. My wife bought it and her mother paid the mortgage, taxes, insurance, etc. After about 2 years my mother in law was able to get a mortgage and have the house put in her name. They were able to transfer the deed without declaring it to be a sale.

    You will definitely want to have an agreement drawn up between you and your mother to make everything legal.

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