Mortgage information help needed!

[Yooper]

It doesn't have to be this complicated. Yoop, why don't you do a promisary note for the $12k, using the house as collateral? Do it as a secured loan. If they did default then you'd have the house and not lose your ass. Would also grant you greater protection if they did split up.

Second choice would be to hold the title in your own name and transfer when the loan is paid.

Not sure about Meeeechigan, but many states have common law clauses and homestead act stuff that could make putting the house in your daughter's name problematic if they split up. He could take her for a ride if things get ugly.

K.I.S.S. is my guiding philosophy for life. In more ways than one.

This is the way we're leaning- a loan agreement for $12,000, using the house as the secured interest. They can't deduct mortgage interest, but at 2%, they couldn't anyway. It's a total of $600 over the five years. We can claim the interest as income, approximately $10 per month.

I know that everything you guys said is true- it's a bad idea to loan money to a family member, if they can't qualify for a loan on their own we shouldn't be the "bank", etc. But....I'm a mom and my grandson lives in an upstairs apartment where they pay $475/month. This house is actually cheaper for them. We've lent them very small sums before ($500) which they've paid back timely. With my daughter in school full time, I don't see them able to buy a house for many many years without a deal like this.

 

[BroadStreetBrewery]

Her fiance is older, but with some old student loans and his credit has suffered.

Credit does not suffer from old student loans, trust me. He has probably had credit issues (late payments, collections, etc) in the past. Regardless, both of them should really work on improving their credit. A $12,000 mortgage should not be too hard to obtain. Yes it may be a higher interest rate, but it is a great way to start increasing credit score. Your daughter may be young, but I would bet that if she has ever had a credit card or any loan she has decent enough credit to obtain a loan.

A lot of things have changed and they may not be able to qualify. If that is the case (don't assume, make sure they apply) then I would buy the house and have them pay you "rent" or get a lawyer as stated above. The lawyer is the best bet, find one that is involved with business/estate/finance. It will probably save you a decent amount on taxes, because you know the government wants their cut.

 

[Yooper]

Credit does not suffer from old student loans, trust me. He has probably had credit issues (late payments, collections, etc) in the past. Regardless, both of them should really work on improving their credit. A $12,000 mortgage should not be too hard to obtain. Yes it may be a higher interest rate, but it is a great way to start increasing credit score. Your daughter may be young, but I would bet that if she has ever had a credit card or any loan she has decent enough credit to obtain a loan.

A lot of things have changed and they may not be able to qualify. If that is the case (don't assume, make sure they apply) then I would buy the house and have them pay you "rent" or get a lawyer as stated above. The lawyer is the best bet, find one that is involved with business/estate/finance. It will probably save you a decent amount on taxes, because you know the government wants their cut.

Well, he had defaulted on his student loans about 5 years ago. He's rebuilding his credit, through paying his cellphone, the student loans and other things on time but it's definitely suffered. My daughter has never had a credit card, or any sort of loan.

$12,000 is not chump change, but it's less than a year of college that I paid for last year and the year before!

 

[BroadStreetBrewery]

$12,000 is not chump change, but it's less than a year of college that I paid for last year and the year before!

Are you adopting?

 

[Pappers_]

$12K for a house? That is less than a year's rent here for most smallish apartments . . .

 

[the_bird]

Just thinking out loud here, but if your daughter could borrow the money from a bank (with you co-signing the loan)... you wouldn't have to front the cash, would only be out if she defaulted (basically the same situation you're in now, you'd end up buying the house), she's start building up a credit history. Interest cost would be more, but given the size of the loan it might be worth paying some more interest for her to have a credit history built up.

 

[KCBrewer]

Contract for Deed

You can even get the legal forms to do it yourself online. You may try http://www.legalzoom.com

 

[Yooper]

Coming from the title insurance industry I am not about to give any "legal advice". But, my friendly advice follows what others have already said... Have a real estate attorney draw up all the documents and most definately have a title search done and a "lenders policy" issued at closing. I know you are under time constraints but if you don't already have one I would look into getting a preliminary title report done before the offer is given. That way you know what you're getting into before hand. Don't want any liens, etc. to show up after the fact. When dealing with foreclosed properties the prior owners often have other financial problems that can come up. One example would be a Federal tax lien against the prior owner's name... The feds can come back and claim an interest in the property for 120 days after the prior owner was foreclosed on. If there is any possible equity in the property they may go after it.

Again, just friendly advice... See an attorney. And not just any attorney! An actual real estate attorney.

But wouldn't a federal tax lien show up with the title search? If we don't get a clear, clean title to the home, the deal wouldn't be closed. I'm sorry to sound so naive- but I am!

 

[cracked1]

But wouldn't a federal tax lien show up with the title search? If we don't get a clear, clean title to the home, the deal wouldn't be closed. I'm sorry to sound so naive- but I am!

It should show up if they do their job right. I'm not trying to scare you off this deal. Private Party Lenders are really very common. It just helps keep you protected if you do your homework. Most likely nothing bad will show up in the report and everything will be fine. That being said, even if something did come up many title insurers would still be willing to issue you a policy but it would be "subject to" any issues that show up which would still leave you out in the cold. The title company can not offer legal advice so it's up to you as the "lender" to know what you are looking at and decide whether to go forward or not. This is why I would get a prelminary report done so you can look it over fully without feeling rushed. Most title companies will do a report for their minimum charge and if the deal closes then whatever you paid will be applied towards the total (which at $12,000 would be a very small difference). Is the bank using a listing agent? If that agent is any good then he/she may have opened title and had a report done already.

 

[hungrymonkey]

I pay more in yearly interest than you are paying for an entire house

 

[kappclark]

Just thinking out loud here, but if your daughter could borrow the money from a bank (with you co-signing the loan)... you wouldn't have to front the cash, would only be out if she defaulted (basically the same situation you're in now, you'd end up buying the house), she's start building up a credit history. Interest cost would be more, but given the size of the loan it might be worth paying some more interest for her to have a credit history built up.

My dad this to help us buy our first car .. a shiny new Yellow VW Rabbit..

 

[triethylborane]

Michigan doesn't require a lawyer for real estate transactions. I've bought three houses, but never had a mortgage or had to wade through any legal issues. I just had the seller do the title search, pay the $$$ and then register the deed with the county. Maybe not the wisest way, but we currently own two homes and have never had a problem.

I KNOW that loaning money to a daughter is a bad idea. But we can loan them $12,000 and it can be less for them than rent. The payment, with a 2% interest rate, would be $210/month for 5 years.

We also talked about buying the house ourselves, and just having them "rent to own" but I think that would be more complicated tax-wise and legally.

We could also just give them a promissary note for $12,000 but then if they break up (there is a 50% divorce rate in the US), we wouldn't have much recourse. Holding the mortgage means that if they defaulted, or if we had a big problem, at least we'd have some recourse to recoup some of the loss.

We definitely don't have $12,000 to give away. But we could get by without it and not go hungry.

Could do a land contract. But it is very wise to get a competent attorney to handle the transaction, particularly in a cut-throat real estate climate.

BTW, any lien on the property that is recorded will show up on a title search, because it is RECORDED. Unrecorded liens are not on your title and are irrelevant.

 

[triethylborane]

Not sure about Meeeechigan, but many states have common law clauses and homestead act stuff that could make putting the house in your daughter's name problematic if they split up. He could take her for a ride if things get ugly.
\

Michigan has statutory dower.

 

[KCBrewer]

My dad this to help us buy our first car .. a shiny new Yellow VW Rabbit..

Man, you could've bought a house or two in MI!

I was planning to head south in about 10 years, but if prices are still like that up there, I may have to reconsider. Or at least a "summer" home, in case I start to miss the snow.

 

[Hugh_Jass]

Yoop,

If your daughter and her husband think it's a good deal, what's wrong with suggesting they approach the current owner with a land contract deal. They make the payments to someone other thantghe grandmother of their child. The owner has a buyer, who is covering their mortgage, if they have one, and doesn't have to pay the utility bills or taxes. At $400/month, a loan of less than $20k would be retired pretty quickly.

Have the First National Bank of Yooper worry about pinching granddaughter's cheeks and buying booties and onesies and even some formula on occasion.

JM2C

Hope you're well.

 

[Hang Glider]

have the first national bank of yooper worry about pinching grandson's cheeks and buying booties and onesies and even some formula on occasion...

ftfy

 

[Yooper]

Well, thanks for all of the advice. We called on our lawyer friend who went to high school with Bob, and he walked us through everything.

My daughter and her fiance are the proud owners of this home. They closed today, and we financed them.

I know, I know- don't loan money to family, etc. But you know what? With everything, we loaned them $14,000. It was less than her college last year, and they will be making payments over 5 years to pay us back. If bad things happen, and they can't pay us back or they split up, oh well. We can't really afford to give away $14,000 and it's our hope they pay us back. I have to be realistic, though, and 50% of all marriages end in divorce. They aren't even married, so I don't know the odds. But we love them, and our grandson now has a home with a yard.

lschiavo (HBT friend) is doing some electrical work next week, to upgrade the service for us, and we are giving them some older furniture. The house is quite nice, especially for a $12,000 house (!), and they now will have a washer and dryer, garage, yard, etc.

My daughter and I have a wonderful relationship, and I am so happy that they have their first home. I'm so glad that I was in a position to help them.

 

[cracked1]

Congrats to your daughter! Glad you consulted an attorney... If all else fails it sounds like you'd have a house for next to nothing (comparitively).

 

[Yooper]

Congrats to your daughter! Glad you consulted an attorney... If all else fails it sounds like you'd have a house for next to nothing (comparitively).

Thanks! They are so excited, and it's actually a pretty nice (small) three bedroom two story in a nice neighborhood. It's about a mile, maybe two at the most, from my house.

 

[the_bird]

Great to hear. Glad it all worked out (at least so far )

 

[Yooper]

Great to hear. Glad it all worked out (at least so far )

Yeah, they've owned the house officially for less than 12 hours. :cross:

I imagine that we'll be giving them some furniture, and lending my truck. This old grandma is pretty handy with a paintbrush so I think I'll be helping with a few little projects.

My daughter was laughing earlier, because it's not too many people other than Yoopers who can say, "I have to go borrow my mom's truck".

 

[hungrymonkey]

I am still blown away with the real estate prices in your area. The first car I financed, cost more.

If I could only live in MI and work my job here. I would be banking a crap ton of money a month.



I do not mean that in a negative way, I am just envious.

 

[Yooper]

I am still blown away with the real estate prices in your area. The first car I financed, cost more.

If I could only live in MI and work my job here. I would be banking a crap ton of money a month.



I do not mean that in a negative way, I am just envious.

Well, it's true that real estate is cheap, and my first car cost more also!

The issue of course is that there aren't any jobs in Michigan, especially in the UP. That's probably the reason that it stayed so cheap, and that this house was one of many, many foreclosures.

I know the family who lived in the house, and moved to North Carolina a couple of years ago to get jobs. The irony is that before we bought the house, she sent a beautiful homemade baby blanket for Tara because she's always liked her. I feel sad that their misfortune allowed us to help provide our daughter with a nice house.