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Help Son Buy House

Discussion in 'Mortgages & Financing' started by talerco, Jan 10, 2021.

  1. talerco

    talerco Law Topic Starter Member

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    Jurisdiction:
    California
    In California.
    We would like to help our son buy a house. He has bad credit and low income... We are good in both measures.
    How best to do this and get owner occupied interest rates?
    ~Title in his name with us as co-signers on loan?
    ~Title in our name only? - it is my understanding a second home does not qualify for lowest rates.
    ~Title in all 3 names?
    ~???
    Any help appreciated.
    NOTE - question about purchase / finance - please don't refer us to parenting forum.;)
     
  2. adjusterjack

    adjusterjack Super Moderator

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    Are you willing to risk your financial future and your credit by doing this? It's something you have to think about because it's a very real risk. No need to answer it here. It's something you have to decide for yourself.

    As to the methods of helping your son, the first thing you have to understand is that you don't get owner occupied interest rates unless you own it and occupy it as your primary residence. Lenders are very smart when it comes to figuring out borrowers' gimmicks.

    You risk is having make the loan payments if he doesn't. You also have the risk of not being able to get him out if the house has to be sold to avoid foreclosure if, at some point, you are also unable to make the payments.

    Then the house would be your rental property and he'd be your tenant. You'd need to learn the tax aspects of owning a rental property. Again, if he doesn't pay, you pay. But, at least, you're the owner and can sell the property if need be.

    The worst of the ideas. Read all about it at:

    why you shouldn't own property jointly with your children at DuckDuckGo
     
    shadowbunny and justblue like this.
  3. talerco

    talerco Law Topic Starter Member

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    All warnings appreciated and calculated.
    IF we choose to have title in his name only AND we agree to co-sign on a loan, will lenders treat this as any other owner occupied?
    We do understand the risks but I have to say that 'all three names' seems a better option because if we end up making payment (which we can) at least we still have some control of the property. Again, IF lenders will treat this as owner occupied with 1 owner occupying.
    Thanks!
     
  4. adjusterjack

    adjusterjack Super Moderator

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    Yes. He will be the owner, occupier and the borrower. Your only involvement will be guaranteeing the loan. Unfortunately, his interest rates are likely to be based on his credit and income.

    That's illusory. If he doesn't pay and won't move out and won't cooperate with selling, then you don't have any control of the property and all you can do is keep paying.

    You should be talking to lenders about that.

    Frankly, I think "helping" your son buy a house doesn't do him any favors. Give a man a fish and he eats for a day. Teach him how to fish and he eats for a lifetime.

    Your son has bad credit for a reason. The best help you can give him is to help him figure out why and set him on a path to improving his credit so that, at some future date, he can buy a house on his own.

    If he can't gather up the discipline to do that then you might as well buy yourself an inexpensive second home and let him live in it.

    I realize I've strayed into the parenting subject. My son is 51 years old. I love him. He has always had financial difficulties but manages to eke out a living. There are things he can do to improve his lot in life but he won't take advice and always has excuses. Helping him buy a house would only enable him to continue his status quo and I'd end up paying for it. Hello resentment and estrangement.
     
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  5. talerco

    talerco Law Topic Starter Member

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    32 years old - and ditto.
    I will talk to lenders. The question I was hoping to get guidance on remains;

    Again, IF lenders will treat this as owner occupied with 1 owner occupying.
    You should be talking to lenders about that.


    Thanks!
     
  6. welkin

    welkin Active Member

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    You are making a mole hill into a mountain worrying about a difference of 0.25% to 0.5% increase in interest rates because of the primary residence requirement on the loan. If the calculations are that narrow using your son's income level and his ability to pay a mortgage then you best rethink the situation.

    You suggest that it would be no problem for you to pay the mortgage if your son doesn't by you cosigning. Well if that is the case, why don't you give him the mortgage? Then he could buy the house for cash. That is if you have the financial capacity to do so.

    You could refinance your own home or take out an equity loan to raise the cash if it is not sitting in some bank or brokerage account. Then have a lawyer drawer up a mortgage agreement and promissory note. The interest rate is up to you. That way if your son doesn't pay you can foreclose on the mortgage or not.

    What kind of numbers are you talking about?
     
  7. flyingron

    flyingron Well-Known Member

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    You can by the home and give him a lease-to-purchase option. That will allow him to build "equity" but gives you the most flexibility.
     
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  8. Zigner

    Zigner Well-Known Member

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    Another option is to buy the home and place it in a trust with sonny as beneficiary of the trust.
     
  9. zddoodah

    zddoodah Well-Known Member

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    Your post doesn't really raise any legal issues. You and your son can speak with a mortgage broker, but only you can decide the extent to which you want to jeopardize your financial future so that your son can own a home, as opposed to renting.
     
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  10. talerco

    talerco Law Topic Starter Member

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    I believe my original post did raise a legal issue about how to hold title to the property.
    This has gone way off topic. I do appreciate all the input.
    Thanks
     
  11. Zigner

    Zigner Well-Known Member

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    How to hold title is not a "legal issue" per se, rather, it's a matter that you need to decide based on your own specific needs.
     
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