Parents have a two homes they own free & clear and going to put one up for sale after they buy a home soon.(like within a month) Both are on SS with total income of about 1800.00/month. Credit score -720. What they are wanting to do is to go ahead and purchase a home and then sell the one they are presently in. One of the homes is presently being rented out. Since I am in one city and they are in another, they have been talking to someone that I believe is steering them wrong. Please respond and see what would be the best loan for them to go on. Would it be a 80/20 or 103% financing till they sell their home?..... They would be grossing about 100,000.00 from the home they are presently in. Any other suggestions would be greatly appreciated. I would like to make sure they are steer in the right way.
2006-12-15 08:43:08 · 10 answers · asked by So_real 2 in Business & Finance ➔ Renting & Real Estate
Planning on signing a contract this weekend. I am going down to talk to the Real Esate agent and mortgage. My mom couldn't remember whether she signed anything or not. Property selling should sell for that much. I was in the profession of mortgages but has been a while. I am not familiar if some new types of loans are out. As I was talking to them last night, they thought you paid full price on the house and no neg. and no one help with closing cost. No, they are not stupid...they are my parents and they are older and that's what happens when someone is not familiar with the process of buying a home since they had been presently in the home they are in 43 years.
I will be there with them this weekend. I wheel and deal when it comes to negotiations. I have save lots in purchase of a home.
Thanks for all your answers. I wish I could give you all 10 points.
Thanks you again from the bottom of my heart!
2006-12-15 09:01:38 · update #1
If they own two homes free and clear. There best bet would wait until they get the money into there bank and than go shopping for a home. Also since they are on minimal income they would want to not go to 100% financing but worse case scenario is 80%. Depending on what the home will sell for and what they are purchasing. Good Credit scores will get you alot but be wary of what type of program they are getting themselves into. Also request to see a GFE or Good Faith Estimate of what the Loan Officer is trying to give them. Any questions or concerns you can always contact me. Hope this helps.
2006-12-15 09:04:40 · answer #1 · answered by Openthathouse.com 4 · 0⤊ 0⤋
If they have lived at least two of the last five years in the house they're going to sell, there will be no capital gains tax up to 500k profit if they're married filing jointly. If they haven't, then they should do a 1031 tax exchange. This would entail selling first, the money stays with the exchange until it goes directly for buying a similar type of property.
Do they plan on paying off the entire loan with the proceeds from the sale? Or just part of it?
If just part, then they should do a first and a second. Let's say they plan on using 90k of the 100 that they're going to get. Then one of the loans (first or second) should be a little under 90k. After they sell their house, they don't have to re-fi the new one, just pay off the loan that's almost 90k.
....... another thought.........
If they've been living in one, and renting the other, sell the one they have not been living in. Do a 1031 and buy something to live in. No capital gains tax then on the rental property. Within 3 years, sell the other old house and no capital gains tax on that either.
2006-12-15 09:08:10 · answer #2 · answered by teran_realtor 7 · 1⤊ 0⤋
You do not say whether they have any cash to put down on the new house. If not, they can borrow some from their current house as a bridge loan to use as a down payment on the next house. They should keep the loan on the new house to 80% of the sale price or less to get the best rate and avoid paying mortgage default insurance. the real question is whether they can handle with their limited income the payments until their old house sells. You don't say where these homes are located. Some markets are extremely slow now, but not all. If the house they are selling is in one of these slow markets, they should be very cautious about getting into another one before the old one sells.
2006-12-15 08:51:12 · answer #3 · answered by larry r 3 · 1⤊ 0⤋
My husband and I purchased a home at 100% financing knowing that we'd have the money from my house (when it sold) to put on the principal. My house sold within a month and we were able to use that to pay down to more than 20% equity. Worked for us but that's our situation.
You also have to consider the housing market at this time and the prices of houses. You can't guarantee that they'll gross 100K from the house they're in now nor that it will even sell in a reasonable timeframe. I'm still driving by houses that have been on the market for a year.
Seeing as your parents already own 2 homes and are renting one out, it doesn't sound like they're financially stupid. There also might be tax reasons that they chose the loan that they did. Perhaps if you're that concerned, you should go to a mortgage specialist and find out all the multitude variations of loans out there and present them with what you find.
2006-12-15 08:51:54 · answer #4 · answered by parsonsel 6 · 1⤊ 0⤋
I own over 30 pieces of property. Your parents should wait until the first property is sold then transfer the money in an exchange to the new property. They won't have to pay any capital gains taxes if any are due (probably not). Property values are stable but not going up. They might even be better to save the money and rent a home. They can rent cheaper than they can own. Maybe a lot cheaper. Check that option. This is a lousy time to sell.
2006-12-15 08:49:04 · answer #5 · answered by sm4125 3 · 1⤊ 0⤋
With the limited amount of info, I would suggest 80/20 to easily avoid PMI. However, that answer could change if there are other details that I am unaware of. Have them make sure that the 20% loan is free of any pre-payment penalties if they want to use the 100,000 to pay off that loan!
For specifics, give me a call (email me for #) or fill this out:
http://www.realty-guru.com/Consultation
2006-12-15 08:55:21 · answer #6 · answered by Anonymous · 1⤊ 0⤋
Are they already under contract? I would say to get their agent to make an offer that includes seller paid closing costs and do and 80/20 and maybe pay off the second loan once the get cash proceeds from their current home. If you need any other assistance you can reach me at smcmillan@ambcmtgs.com good luck to them. also.....they should be able to get these types of answers from their agent.
2006-12-15 08:52:06 · answer #7 · answered by Anonymous · 1⤊ 0⤋
Hi ,
Am a Mortgage loan officer and we provide loans for the people with less income or with bad credit ,refinance is also like that no problem at all ...
We provide loans at the most modest rates .For more information call kish at 480.751.4125 or write to kishaloy_bhowmick@yahoo.com
regards,
kish
2006-12-15 08:59:39 · answer #8 · answered by kishaloy_bhowmick 2 · 1⤊ 0⤋
Watch out for pre-payment penalties!
Why not just buy the new home with a contingency on selling the old one?
2006-12-15 08:46:05 · answer #9 · answered by Automation Wizard 6 · 1⤊ 0⤋
speak to a lawyer
2006-12-15 08:45:23 · answer #10 · answered by ? 7 · 1⤊ 1⤋