• We’re currently investigating an issue related to the forum theme and styling that is impacting page layout and visual formatting. The problem has been identified, and we are actively working on a resolution. There is no impact to user data or functionality, this is strictly a front-end display issue. We’ll post an update once the fix has been deployed. Thanks for your patience while we get this sorted.

ATOT mortgage gurus, lend me your ears

C

Corporate Thug

Lifer
So my parents want to buy a place. Although they can afford the payments, they are not in a position to be approved for the loan (long story). I'm likely in the same position because I just bought a place in August 2010 so I already have a mortgage.

Anyway, my dad's life long friend offered to co-sign the loan. Here is the question: can the friend provide the down payment and cosign the loan and have the house under MY NAME as fee simple?

Are there any tax implications for me? In other words, is the second house considered an "investment" property or anything funky like that?
 
<------ Mortgage loan underwriter

Let me see if I am getting this. You want your name to be on your parents house but have someone go with you on the loan? Help me understand the reasoning behind this.

Freddie Mac currently allows what is called a non-occupant co-borrower to help someone qualify (basically co-signing).

The reason this is beneficial is because it allows that person to still get owner-occupied pricing, instead of investment pricing, which would be what would happen if the friends bought the house outright and just allowed your parents to rent or make the payments.


Not to get inside-baseball here, but it is generally a 1.75% to the fee for your loan if it ends up being non-owner occupied (investment) with at least 25% down. With only 20% down, it is a 3% hit.
 
Corporate Thug said:
I know he will be on the mortgage but the question is can the title be written in a way that I am the sole owner?
Click to expand...

When the loan funds, the bank will most likely only allow the people on the loan to be on title.

However, you can literally record a deed right after it closes, which puts the vesting to whatever you want.

The banks dont like this, but there is nothing they can do.
 
Learned something new.

In my experience, banks/mortgage companies get pissy about who owns/living in the house/land. Also about who's name is on the title. Cosigner isn't a relative/not living there, might be a problem. You aren't living there or on the loan so they may not put your on the title.

They wouldn't want to give you a mortgage and then you buy another house, move into it and rent the 1st.

Edit: OCGuy. He's the man.
 
OCGuy said:
<------ Mortgage loan underwriter

Let me see if I am getting this. You want your name to be on your parents house but have someone go with you on the loan? Help me understand the reasoning behind this.

Freddie Mac currently allows what is called a non-occupant co-borrower to help someone qualify (basically co-signing).

The reason this is beneficial is because it allows that person to still get owner-occupied pricing, instead of investment pricing, which would be what would happen if the friends bought the house outright and just allowed your parents to rent or make the payments.


Not to get inside-baseball here, but it is generally a 1.75&#37; to the fee for your loan if it ends up being non-owner occupied (investment) with at least 25% down. With only 20% down, it is a 3% hit.
Click to expand...

OC Guy, I was waiting for you to chime in.


You want your name to be on your parents house but have someone go with you on the loan? Help me understand the reasoning behind this.
Click to expand...

Yes, for various reasons, my parents cannot qualify for the mortgage and cannot own a house. Essentially, it would be an investment for me. Also, I want it under my name because I don't want to go through the hassle of will or living trust for my parents pass - they don't have any other assets.
 
Last edited:
OCGuy said:
When the loan funds, the bank will most likely only allow the people on the loan to be on title.

However, you can literally record a deed right after it closes, which puts the vesting to whatever you want.

The banks dont like this, but there is nothing they can do.
Click to expand...

I will be on the loan as well though...

So we will both be on the title and then I record the deed under my name and I'm the sole owner? Is that how it works?
 
Last edited:
Do you only need the down payment from the friends, or do you need their income as well?

If you only need their gift money, I can PM you some ways to make it work. Generally banks only allow gift funds for closing from blood relatives.

If you need them to qualify with their income as well, then you just all three would go on the loan.

It doesn't sound like you will be able to get owner-occupied pricing if your parents arent on the loan, so plan on putting 25&#37; down.

Lucky for you, rates are amazing right now, so investment properties can still be had in the high 4%/low 5% range.

As far as taxes, you would get to write off things such as depreciation, taxes, mainenence, etc on your Schedule E.
 
OCGuy said:
Do you only need the down payment from the friends, or do you need their income as well?

If you only need their gift money, I can PM you some ways to make it work. Generally banks only allow gift funds for closing from blood relatives.

If you need them to qualify with their income as well, then you just all three would go on the loan.

It doesn't sound like you will be able to get owner-occupied pricing if your parents arent on the loan, so plan on putting 25% down.

Lucky for you, rates are amazing right now, so investment properties can still be had in the high 4%/low 5% range.

As far as taxes, you would get to write off things such as depreciation, taxes, mainenence, etc on your Schedule E.
Click to expand...

Thanks again OCGuy.

I would need his income as well because I bought my own house in 2010 (if I didn't have that first mortgage, I would have qualified). Just to clarify, it will only be two people on the loan: me and the friend.

The 25% wont be a problem and it wont make much of a difference since the mortgage is so low.


As far as the 1.75%/3% hit, is that 1.75%/3% of the cost the underwriter charges or the 1.75%/3% of the entire mortgage?

Thanks again!
 
Corporate Thug said:
Thanks again OCGuy.

I would need his income as well because I bought my own house in 2010 (if I didn't have that first mortgage, I would have qualified). Just to clarify, it will only be two people on the loan: me and the friend.

The 25&#37; wont be a problem and it wont make much of a difference since the mortgage is so low.


As far as the 1.75%/3% hit, is that 1.75%/3% of the cost the underwriter charges or the 1.75%/3% of the entire mortgage?

Thanks again!
Click to expand...


OK cool. Just keep in mind you will most likely get to use 75% of the estimated future monthly rent towards your income, to help off-set some of your debt.

As far as the 1.75%/3% fees, usually your loan-officer will absorb these fees by raising your rate to compensate, instead of it coming out of your pocket directly. So really you may never see anything about these rate hits, but they are the reason why someone with your exact credit score and down payment would have a lower rate if they were buying a home to live in for themselves.
 
OCGuy said:
OK cool. Just keep in mind you will most likely get to use 75% of the estimated future monthly rent towards your income, to help off-set some of your debt.

As far as the 1.75%/3% fees, usually your loan-officer will absorb these fees by raising your rate to compensate, instead of it coming out of your pocket directly. So really you may never see anything about these rate hits, but they are the reason why someone with your exact credit score and down payment would have a lower rate if they were buying a home to live in for themselves.
Click to expand...

Gotcha, in 2010, I got a rate of 4.5% 30 yr fixed/20% down. Hopefully with the co-signer, it won't be much more than that.

Just to clarify my original question, lets say friend and I sign the mortgage (both our names are on the mortgage with whatever rate we get), I can record the deed under my name right after we close escrow and I'm the sole owner upon recording?
 
"As far as the 1.75&#37;/3% fees, usually your loan-officer will absorb these fees by raising your rate to compensate, instead of it coming out of your pocket directly. So really you may never see anything about these rate hits, but they are the reason why someone with your exact credit score and down payment would have a lower rate if they were buying a home to live in for themselves."
Click to expand...

My sister owns a condo that she couldn't sell and is now a rental.

If she wants to refi, will the fees or rate bumps and increased downpayment requirements, also apply to her?

And what do you think of 5/1 ARM vs 30 year fixed?
 
mshan said:
My sister owns a condo that she couldn't sell and is now a rental.

If she wants to refi, will the fees or rate bumps and increased downpayment requirements, also apply to her?

And what do you think of 5/1 ARM vs 30 year fixed?
Click to expand...

If she couldn't sell it, I am assuming it is because the value wasnt there?

To refinance an investment property, you have to have 25&#37; equity. The same exact fees/rate hits do apply.

5/1 ARM is basically just a market gamble. You are betting against the bank that rates will stay low in 5 years, or that you will sell/refinance before then. They are betting the other way.
 
She has a 30 year fixed at 6.125&#37;.

Original mortgage amount was $179K, now $169K.

Original purchase price was $250K, I am guessing it is only worth 200K or maybe 225K in terms of appraisal. Tax appraisal on MLS for complex condos was $197,500, but recent sales prices have been lower than that I think.

Credit score and other qualifying criteria are fine, though she would want to roll closing costs and other fees into loan.

It sounds like it won't be worth it in terms of rate reduction (?)
 
Last edited:
mshan said:
My sister owns a condo that she couldn't sell and is now a rental.

If she wants to refi, will the fees or rate bumps and increased downpayment requirements, also apply to her?

And what do you think of 5/1 ARM vs 30 year fixed?
Click to expand...
Generally, yes, because she is no longer living in it, but OCGuy is the pro.

A 5/1 ARM is nice if you plan on paying off the loan quickly, especially within the fixed period of the loan, otherwise you'll have to figure out if you can afford the payments once the teaser period is over. And with interest rates likely on the upswing, you will have to consider how much the rate will adjust upward. Either that, or you will have to consider the refi possibilities in 5 years - i.e. where rates will be at, the fees associated with refi-ing,and whether you will actually be able to refi in 5 years. If these are things that will cause you stress or are uncertain about, then go with the fixed rate.

EDIT:
Oops. He already answered while I was typing up my response. 😛
 
Last edited:
Corporate Thug said:
Gotcha, in 2010, I got a rate of 4.5% 30 yr fixed/20% down. Hopefully with the co-signer, it won't be much more than that.

Just to clarify my original question, lets say friend and I sign the mortgage (both our names are on the mortgage with whatever rate we get), I can record the deed under my name right after we close escrow and I'm the sole owner upon recording?
Click to expand...

The only problem with the above is that at least in theory it could trigger a mortgage acceleration clause and it could also violate your Mortgagor's Affidavit of Title, depending on what the bank required before the loan closed. I've never heard of anyone trying to do what you're describing, so I'm not really sure if it would trigger the acceleration clause since it's not a true sale, but that might be something to talk to the bank about. As long as the "friend" executes the documents properly and is on the Note, the bank might be ok with it, but I guess the real question is whether you want to essentially lie to them about who is going on the deed and take your chances with potential litigation later.

Are you going to have a separate attorney/settlement agent handling the closing? If so they will have certain obligations to the bank prior to releasing the loan funds. The bank may want to see the Deed or dictate the terms of it prior to giving you authorization to close and the attorney may very well be obligated to record that specific deed. This sounds like something that a local real estate attorney might know more about if you ask me. Then again, maybe if you just talk to the lender, they will allow this guy to co-sign without taking any ownership interest in the property.

I'm sure OCGuy knows a lot more than I do about the mortgage aspect of this.
 
Taughnter said:
The only problem with the above is that at least in theory it could trigger a mortgage acceleration clause and it could also violate your Mortgagor's Affidavit of Title, depending on what the bank required before the loan closed. I've never heard of anyone trying to do what you're describing, so I'm not really sure if it would trigger the acceleration clause since it's not a true sale, but that might be something to talk to the bank about. As long as the "friend" executes the documents properly and is on the Note, the bank might be ok with it, but I guess the real question is whether you want to essentially lie to them about who is going on the deed and take your chances with potential litigation later.

Are you going to have a separate attorney/settlement agent handling the closing? If so they will have certain obligations to the bank prior to releasing the loan funds. The bank may want to see the Deed or dictate the terms of it prior to giving you authorization to close and the attorney may very well be obligated to record that specific deed. This sounds like something that a local real estate attorney might know more about if you ask me. Then again, maybe if you just talk to the lender, they will allow this guy to co-sign without taking any ownership interest in the property.

I'm sure OCGuy knows a lot more than I do about the mortgage aspect of this.
Click to expand...

I wouldn't lie to them, I would tell them exactly what I intend to do. I can really easily bypass this step by setting up the trust wherein my parents have a life estate in the property and upon their passing, I get the property in fee simple. However, that just creates more expense now and exposes me to potential double taxation.

I can also request that the co-signer execute a quit claim deed shortly after the sale. My method simply bypasses this.

I have a friend who closed a deal for my property last year, so I'll run this by him.
 
I got the answer just in case anyone was interested: title gets recorded with both signatories on the mortgage and then the co-signer simply files a quit claim with the County Recorder after the initial recording.
 
You must log in or register to reply here.

TRENDING THREADS

Back
Top