My father is going to mortgage me to buy a home, is there any problems with this?
Home Mortgage
Roland of Gilead asked:
I’m going to avoid PMI, closing costs, and get a really low interest rate of around 3-4%. Is there any downside to having him do this for me???
This would be a fixed rate. Not an arm or variable.
Jacob
I’m going to avoid PMI, closing costs, and get a really low interest rate of around 3-4%. Is there any downside to having him do this for me???
This would be a fixed rate. Not an arm or variable.
Jacob
July 14th, 2009 at 12:52 pm
Sam
I don’t understand why he would mortgage you for a home
But a rate of 3-4% is a teaser rate (mortgages are around 6% right now). It will eventually go up and then you need to make sure you can afford 7-8% interest payments in 2-5 years.
I personally would get a fixed rate rather than a subprime or ARM mortgage.
July 14th, 2009 at 7:15 pm
Ramon
the biggest downside I see is that it wont be improving your credit other than that sounds good to me
July 16th, 2009 at 8:46 pm
Harry
Two things, first a mortgage is a great way to build credit and by getting the loan from your father you won’t have any effect on your credit. And 2 usually loans between family member creates a giant strain on the relationship, you will be in debt to your father for 30 years.
July 18th, 2009 at 2:50 am
Florence
If your father is going to lend you the money to buy a home (Dad will be the mortgage company) then please go through a company like Virgin Money to set up the loan. You will both sign legal papers because this will be a real loan. That way you can both get the tax deductions that you are entitled to (he as the seller and you as the buyer). Without a legally drafted mortgage agreement, you cannot take the tax deductions plus if Dad gets mad at you and wants to kick you out and take back the house, he can because without the paperwork showing the mortgage, you are just a renter.
July 20th, 2009 at 9:47 pm
Kelly
If I understand your question, your father is going to obtain a mortgage for you ? Or is your father going to extend a mortgage to you ? Either may be OK as long as the contract is understood and complied to by both parties. If he should need to sell the contract, the interest rate is so low as to require him to take a huge discount for it. The advantage is that should you make a late payment, I doubt your father would foreclose on you or report it to a credit bureau. The tax situation is about the same as he reports the interest income and you deduct the payments.
I think your father is doing you a very big favor.
Good luck.
July 23rd, 2009 at 2:14 pm
Nicole
ya you get to avoid those costs, and that is great.
and she is wrong obviously above, if you have a non-adjsutable mortgage, it will never fluctuate.
the only downside is that if you go belly up, your not screwing over a bank, you are screwing your father.
and whether or not you think you would be able to afford it, loans are writen on a 30 year basis, and needless to say, life style change over basically half a life time.
so oother than you just ripping him off, nothing
July 27th, 2009 at 12:22 am
Regina
There may possibly be a problem. Please make sure that you check IRS codes on personal loans and mortgage loans to individuals.
You will not avoid some closing costs. Those will vary by State, and most likely there will be a buyers Title policy to purchase.
On the other hand, FHA does have a “Kiddie Condo” program (terrible name I know) where your parents can legally co-sign. I suggest checking into that.
Just a question what happens if you should die before paying off the mortgage? Although this happens infrequently, should you die before the loan is paid off your parents may want to consider becoming the beneficiary of a term life insurance policy taken out for the same cost as the home. That way, should the impossible happen, they are assured return of their investment.
Speak with an insurance or financial professional before considering that other.