Buying a house from a relative?
Question by batman253: Buying a house from a relative?
I have an relative that wants to leave her house and move to a different city. She is willing to transfer the house to my name in order for us to avoid paying the cost it takes when you close on a house.
She had the house for sometime now. She no longer has a mortgage on the house. The house is now worth $ 450,000. Of course, she wants her money back based on the value of the home.
In order for me to pay her back, I have to take out a mortgage. My question is that can she transfer title to my name first and I can then obtain a mortgage to pay her back to avoid closing costs. Or must we play the traditional role of buyer and seller.
Also, (If this can be done)-If the house is under my name and I take out the mortgage-would this be considered a “primary mortgage” which I can get a regular 30 year fix mortage or would it be considered a “home equity loan” which usually has a higher rate than a traditional 30 year fix?
Best answer:
Answer by Loki
As soon as you get any mortgage, you will pay some sort of a closing cost.
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Tags: Buying, House, relative, transfer the house
I would just purchase it. Because she is a blood relative, she can give you a gift of equity. For example: if the home is worth $ 450K, have her sell it to you for that much, but then “gift” you 20% or more of the equity.
Basically, find out how much she would be willing to sell it to you for. Get approved for a basic fixed mortgage (rates are lower on these than home equity loans right now due to the prime rate being at 8.25% right now.) Your lender will order an appraisal and whatever the difference is between the amount she’s willing to sell it to you for and the value will be the gift of equity. You’ll also be able to use the equity to pay for the closing costs, so you won’t have to come to closing with money out of your own pocket.
There will be closing costs, but this way is the easiest route to take.
Now, the other way you’re talking about, your relative would “quit-claim” you onto title, but because you’ll still need a mortgage,this may cause problems and some lenders still won’t view it as a refinance instead of a purchase. Speak with your lender and see what they have available.
You still are going to need lawyers and all that kind of stuff. You will still need a title search and survey, which are your costs.
The only thing she is really saving is the real estate agents fee, which you would not be paying any how.
Maybe state taxes would be in there too.
I think you would have to take it as a home equity loan.
Call up some mortgage companies, get their input.
Dear…please keep your relations and the commercial dealing seprate.be a traditional buyer. Take all the necessary steps to get the papers of the property .it means have a clear marketable title.Remember its an investment of life time…Might be you and your relative are on good terms today…but who has seen tomorrow?
It depends on the law in your state, usually if its a sibling there would be no transfer tax, but I doubt that any further down the tree it would be a transfer tax free transaction. Ask your local taxing body. Part 2 a first mortgage would offer the lower rate it wouldn’t be a home improvement loan. You will have to pay loan fees no matter what type of transaction and also have to pay prorated real estate taxes on the transfer. So there will be some closing costs no matter what you do, just not as high if you can avoid the transfer tax.
closing costs are inevitable. you MUST pay some closing costs, regardless. things like deed stamps, prorated taxes, attorney’s fees, etc will have to be paid in order to transfer title.
you need to 1. contact a real estate attorney, and discuss the situation. 2. contact a mortgage company/lending institution regarding terms, etc for a possible mortgage.
i hope this helps!
Hi,
Be careful… If part of the value is to be considered as a GIFT,
you may also have to declare a GIFT in your personal income tax
and have to pay taxes on that portion… Would that be a saving? Doubtful…
The sale won’t cost you so much if done yourself at your local courthouse, an NO a survey of title is NOT an obligation. It only
protects the buyer and is RECOMENDED…
The big problem in transfering the house first is that it then becomes a gift… How much personal tax would you like to pay…lol…
The other best way is to simply have the seller hold the mortgage herself ( an owner financing) … Relative or not makes
no difference… Then find a mortgage to pay her off when ready.
Don’t forget that the seller will have to pay income tax on the
sale if over 250,000. depending on your state, etc…
A third way would be to ADD you in as an owner, which is a
very minimal cost… She than is not considered selling at all…
and you can take personal financial agreements….Put them
on writting anyway… You can than refinance the house together.
So she will have her money, and you your house….
Make sure of every aspect, because in case of death of either one, are there other parties that may claim some rights
on half the house….If you’re the only relative than no problem.
If you can’t figure it out, go see an attorney… You don’t want
to be doing any fraud here…. You have to pay very little to transfer
anyway… the most cost is on the mortgage…
Good luck…
I would say never do business with family!