We are first time home-buyers, can we buy a house we won't be living in?

Question

Here's my dilemna. My parents have 8 years left on their 15 year mortgage. They have just recently gotten stuck paying for a house they co-signed on and have decided to down-size into the smaller house (they are contracted to buy that house in 2 years) and my wife and I are living in their old house (the one with 8 years left on it).

Their credit has gone down hill since the co-signing mishap and they might not be able to get a loan for this other house (even if we bought their old house). I was wondering if we could put their smaller house in our name while we live in and fullfill their 15 year mortgage. (Does that make sense?) Is this legal? I don't see why not. Feel free to ask questions.

Answer 1

The first thing that comes to mind is how tight the banks are right now. You would have to have stellar credit to add a mortgage onto your debt-to-income-ratio scorecard. Normally banks, mortgage companies wont allow first time home buyers to purchase a home that will NOT be thier primary residence. At the same time the house with 8 years left on the mortgage means there is equity in the home and is not much risk from a lenders perspective. You could put your name on the new loan if your name is on title on the 8 year one if you arent obligated to the mortgage on paper. You find the right broker and they will be able to juggle the timing on when to file for the loans. Be sure to use different title companies and be sure to file everything within a 30-35 day period because of the credit reporting agencies. Too many inquiries drives down your credit score and drives up the mortgage interest rate. And no, its not illegal but the ethical aspect of playing the game is . . . 'beating the banks at thier own game'? And are your parents ok with your name being on the second smaller house? Dont go for any convoluted mortgages. There are still lots of shady brokers out there who will promise you the moon if you just sign this adjustable rate mortgage because you're credit isnt strong enough to get a fixed rate" Thats baloney dont fall for it. That ARM will eat you alive i dont care what cap% they give you, just dont do it its a trick. There is nothing illegal about putting your name on the smaller house but im pretty sure the bank will at the very least, state that it will be your primary residence. They all know that once that mortgage is approved if you decided to raise apes in there no one can do anything except maybe the neighbors raising a fuss.

Answer 2

If you're trying to get a deal through a first time home buyers program, that generally would require that you actually live in the house that you are financing, as your main home. But if you aren't going through any particular program and are just getting a mortgage, it might be OK. But check with the lender, since many mortgages require that you actually live in the home you are buying.

I'm real confused though on the status of the house. You say they got stuck with it because they had cosigned, then say they are contracted to buy the house in two years - that just doesn't make sense if I'm understanding what you are saying. If they cosigned and the primary borrower defaulted so they got stuck with it, what's the two years from now about? And why would they need to get a loan for the house - if they're cosigned on it, sounds like they already have one.

Answer 3

First, this is the reason you NEVER, NEVER co-sign for anyone, including and especially family.

The answer to your question is that if you purchase the old house, you will need to get a new mortgage. Almost all mortgages are NOT assignable.

You could move into the the old house and make the payments, but the loan would still be in their name.

I'm not sure what "contracted to buy that house in 2 years" means.

I would talk with a lender to see if they qualify for the new mortgage.

Answer 4

In theory, you sure can. With the new lending laws, it is harder for people to get creative with mortgages (which is a good thing considering it's negative effect on the market). If you have a good debt/income ratio to cover both loans, the bank will lend it to you. Whichever home isn't owner occupied, will be a higher rate, but that shouldn't matter. It is legal, and can be done if you are approved for the loans.

Answer 5

It isn't legal. And it is going to create other problems. God forbid your parents should die. What happens to their house (the one in which YOU are now living)? And what happens to the smaller home, the one in which your parents are living? Let's say you get your parents' house, in their will. But then you lose the other house. Plus, you may be forced to sell the house in which you are living to pay for the other place. And so you may lose both homes.

Answer 6

As long as you can prove the lender that you can afford the mortgage payments there is no problem.The dti meaning debt to income ratio must qualify the lender guidelines.I hope this helps,good luck

Answer 7

u need to talk with a few lawyers.
u are looking at a financial legal nightmare.
if u don't live in a house u owner and have others living there - u can get some messy legal problems depending on state laws.

Answer 8

It sounds risky as hell to me. If I were you I would go to daveramsey.com and ask him. This man knows all about what to do smart with money and real estate! Good luck!
By the way, all of Dave Ramsey's advice is free. He is on the radio every day!

Answer 9

your best bet is talking to a mortgage lender it doesnt sound like something they would risk doing but you never know.. found some great real estate information, it may not be for your area but its really useful
http://www.deedeehomes.com
http://www.deedeehomes.com/PageManager/default.aspx/PageID=1980119