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This is my first post but I've been lurking here for a while. I'm looking for some advice.
Here is the situation:
In the past year - both of my parents developed medical conditions which led them to leave their jobs. They both qualified for early retirement and will receive great financial benefits for the rest of their lives.
They recently begrsan the process of selling their home for $520,000. It will close in about a month or so.
We would like to buy a new home in another state for 200k or less. We will view a few homes this week.
The plan:
Instead of dumping all of the cash into the new homes, we would like to invest some of it and take out a mortgage.
The problem:
My parents have credit ratings of ~420 and would not be approved for any mortgage.
The Solution:
I would like to get a mortgage together, or under my name alone, to help make the transfer between homes seamless. We can start closing on the new home while the old home is in process. The home will be paid off within 3 years or so.
I have a 680 credit score
Current salary is 45,000yr
Income for 07 was about 38k
Income for 06 was about 23k
Income for 05 was about 18k
I have a 25k student loan and 2-3k credit card debt statement.
What are the chances that I can/will get approved for a Mortage?
Is this a good plan?
I'm meeting with a "real estate guy" tomorrow and don't really know/trust this person.
Any helpful advice would be appreciated.
Last edited by somesnapper; 05-18-2008 at 07:28 PM..
Depending on what % your parents are able/willing to put down, you shouldnt automatically assume that they cant get a loan. If your saying that they could pay cash for the new house, then tell them to put 50% down, and they should be able to find a bank to give them the mortgage.
If they simply want to help fix their credit.. Tell them to put some money into a CD (I know.. poor investment return) and then borrow against the CD and then pay cash.. Depending on the bank these payments will show up on a credit report.
If the goal is to help your credit along with theirs. I would think about the fact that this would hinder your ability to get another mortgage down the road for yourself.
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Quote:
Originally Posted by somesnapper
Hello all,
This is my first post but I've been lurking here for a while. I'm looking for some advice.
Here is the situation:
In the past year - both of my parents developed medical conditions which led them to leave their jobs. They both qualified for early retirement and will receive great financial benefits for the rest of their lives.
They recently begrsan the process of selling their home for $520,000. It will close in about a month or so.
We would like to buy a new home in another state for 200k or less. We will view a few homes this week.
The plan:
Instead of dumping all of the cash into the new homes, we would like to invest some of it and take out a mortgage.
The problem:
My parents have credit ratings of ~420 and would not be approved for any mortgage.
The Solution:
I would like to get a mortgage together, or under my name alone, to help make the transfer between homes seamless. We can start closing on the new home while the old home is in process. The home will be paid off within 3 years or so.
I have a 680 credit score
Current salary is 45,000yr
Income for 07 was about 38k
Income for 06 was about 23k
Income for 05 was about 18k
I have a 25k student loan and 2-3k credit card debt statement.
What are the chances that I can/will get approved for a Mortage?
Is this a good plan?
I'm meeting with a "real estate guy" tomorrow and don't really know/trust this person.
Any helpful advice would be appreciated.
What are the minimum payments on the credit cards. Are the student loans deferred? Do you plan on living in this home at all? Do they have any money to put down until the current home sells? They will have a very difficult time getting a mortgage with a 420, and it may be impossible. If they were to put 50% down on the home they could actually buy it with a reverse mortgage, although I am not necessarily recommending it, it is an option as it is only age and equity driven. Credit and income do not matter at all.
They don't have much cash for a down payment now - but will have enough for a 50-75percent dp once the old home is sold.
Meaning my parents will have to wait untl the old house is closed before persuing the new home.
Will they essentially be homeless until the new mortage is approved?
This limbo period scares us.
They need to go to a local bank and get approved to buy. Because of their credit scores they will have to get a bank portfolio loan where the bank holds the mortgage in house. Probably won't be able to get a 30 yr. fixed, but big deal. More likely a 5 yr. balloon. Set closings up for the old house and the new house back to back and there will be no "homelessness"..
They don't have much cash for a down payment now - but will have enough for a 50-75percent dp once the old home is sold.
Meaning my parents will have to wait untl the old house is closed before persuing the new home.
Will they essentially be homeless until the new mortage is approved?
This limbo period scares us.
There is a thing called "renting" that is ideal for a situation like this. They can rent a place for a year and get things sorted out. They can even rent until they get their credit score back up to a reasonable level. It also takes off the pressure of having to find a good home right away.
If you use your credit to get a mortgage for someone that may not qualify or to get a better rate it could be considered a "straw purchase" which can be considered mortgage fraud.
A straw purchase is when a client, usually with excellent or better credit than the person wanting the home, buys a home with no intention of living in it. The intent can be good, but it doesn’t change the fact that this is loan fraud. These "buyer" states that they will be living in the property but never had the intention to do so, just so they can get a approval,better rate or not have to put so much money down.
As other have suggested with 50% down they should be able to find an approval
If they have a signed contract on the house they may also be able to do a bridge loan taking the equity to put down on the new house.
The only risk would be if the offer on their current home doesn't go through.
as tim suggested back to back closings is a good option so they won't be "homeless"
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