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Old 04-12-2019, 11:23 AM   #1 (permalink)
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Mortgage Know it Alls, step on in

I have little to no debt, decent assets, good income, terrible credit, probably 500, after divorce. I was ok with this, because I was going to rent 2 more years until my oldest starts driving, then build a shop and put a manufactured home on some property I own outside of town and live debt free.

My aunt, whom I've been renting a single family home from for several years is now in a hurry to sell, to leave the state and buy a home near her grandchildren.

Decent house, very close to family, and my kids schools, but no room for me to build a shop, or even put an ugly truck in a side yard without a helicopter. It was great when i was a broke single dad with a baby, but won't work for the next chapter.

House and mortgage in aunt and grandma's name, 21 years left, 5.3% interest 126,000 due. House roughly comps at 185k, I can buy it at 160k no Realtors/commissions.

My plan at this point is to buy it and spend a year, 2 max preparing to sell, then get out before prices come down.

If my mother were to buy it, with me on it, it would be a 2nd home for her, and change interest rates.

What's my options to assume my aunts loan thru a title agency, para legal, etc? Would this be acceptable to free her up when she goes shopping for her next house, which will also be with a 30k down payment?

Is there a better way where my mother's great credit and my savings/income could get me a better rate?
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Old 04-12-2019, 11:42 AM   #2 (permalink)
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Talk to a mortgage broker ( not a bank), if you can jack your score up to 580 you can probably get a FHA at 10% down. There are tricks to getting your score improved. A broker may some options outside normal channels that require a larger down payment.

Mortgage brokers have a large pool of lenders available, and know the credit system. That's the place to start.
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Old 04-12-2019, 12:19 PM   #3 (permalink)
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I would find a credit union or local bank that will hold your loan in house. I have a local credit union I work with who is willing to be very creative with mortgage and property loans.

Do you have any money to put down? This will open up a lot more lending doors for you, as banks can be more creative if you have a good chunk of money to play with.

If your aunt's loan is assumable (big if), her lender will still run you through the ringer to make sure you will be a good fit for them to lend to. It may actually be easier, especially with your credit scores, to get a new loan than try to assume your aunt's loan. Cost to borrow will probably be all over the board and it may or may not be cheaper to assume. You will need to read your aunt's mortgage documents.

Hopefully you can find someone to write you a mortgage note. Good luck!

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Old 04-12-2019, 12:26 PM   #4 (permalink)
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Just came in to say don't get a 30 year loan.
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Old 04-12-2019, 12:31 PM   #5 (permalink)
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get on credit karma and get your numbers up. that should be your first priority
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Old 04-12-2019, 12:39 PM   #6 (permalink)
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check tax laws, you may shoot yourself in the foot financially if you dont stay long enough which may influence your decision.

getting in on a title with family is bad news without some very CLEAR AND CUT guidelines, but even then its a big risk for relational problems. IMO the extra cost is worth keeping things clean and simple when owning something.
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Old 04-12-2019, 12:46 PM   #7 (permalink)
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no room for me to build a shop, or even put an ugly truck in a side yard without a helicopter. It was great when i was a broke single dad with a baby, but won't work for the next chapter.
Find something that fits. I'd NEVER buy a house to even live in temporarily if it wasn't somewhere I'd be happy for the rest of my life. What happens if the next housing bubble bursts before it gets flipped? Are you gonna buy a helicopter anytime soon???

Too many OTHER places out there to settle. EVER!
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Old 04-12-2019, 03:47 PM   #8 (permalink)
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Assuming it'll actually sell for $185k, you'll be paying $11.1k in commission when you sell it, assuming you use a traditional broker. How much are you going to have to put in to it to fix it up to sell over the next 2 years? What if the market tanks before then? Would you rather be stuck in a place you like or this place?

If you can get a loan for this one, you can get a loan for another place that suits you better. The little bit of potential upside doesn't seem worth the risk.
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Old 04-12-2019, 04:17 PM   #9 (permalink)
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Old 04-12-2019, 05:02 PM   #10 (permalink)
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Can your mother buy it (without you) and then you work a deal with her to pay on it?
Even a 2nd home interest rate is going to be better than a shitty credit interest rate.
Is the market even that good there where it can gain value in only 2 years?
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Old 04-12-2019, 06:30 PM   #11 (permalink)
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I would not buy it in hopes of making a few dollars in a couple of years. It doesn't sound like much of a house although I don't know your area that sounds like a lot of money for a very small house.
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Old 04-13-2019, 12:36 AM   #12 (permalink)
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Just came in to say don't get a 30 year loan.
We just converted a 17.5 year adjustable to fixed 15 years at 3.5. Happy as shit. Saved 3.5 years payments too.
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Old 04-13-2019, 12:52 AM   #13 (permalink)
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Are you allowed to write loans for yourself if you have a mortgage brokers liscence? It's only 20hrs of class time and an exam.
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Old 04-13-2019, 02:43 AM   #14 (permalink)
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Sounds like you need to find a new place to rent......

160k isn't a good enough deal to make it worth it, plus if you don't stay 2 years you will pay capital gains tax on profit. Buying a house you can't afford, a house you don't like, while having bad credit, and having your mother on the loan are all bad ideas. I would stick to your original plan, and just find another place to rent for awhile.
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Old 04-13-2019, 07:19 AM   #15 (permalink)
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How much is rent? If $800 or less your not going to be saving any by buying. You say you want to dump it before the market tanks, when will that be? If you sell in less then 2 years the taxes you pay will likely offset any profit. Also 5.3% intrest rate blows donkey nuts in todays market.
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Old 04-13-2019, 07:57 AM   #16 (permalink)
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Quote:
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Assuming it'll actually sell for $185k, you'll be paying $11.1k in commission when you sell it, assuming you use a traditional broker. How much are you going to have to put in to it to fix it up to sell over the next 2 years? What if the market tanks before then? Would you rather be stuck in a place you like or this place?

If you can get a loan for this one, you can get a loan for another place that suits you better. The little bit of potential upside doesn't seem worth the risk.
This is pretty solid advice.

Just using the numbers you've thrown out. If you buy @ 160k, sell in 2 years for 180k that's a 20k delta. How much fixing up are you going to need to do to the place to make it worth 180k? 10 grand? More? Lets run with 10k.

If you only put 10 grand into it and sold it at your theoretical max price, you're still 1k upside down in 2 years.

Purchase price 160k
Sale price 180k
Commission 10.8k
Rehab 10k


180K - 160k = 20k - broker fees of 6% ($10,800) = 9,200 - 10k rehab fee = (800)

The good news is you aren't subject to capital gains tax on a net loss.

Seriously, where do you want to be in 2 years? It may be time to move onto that next chapter sooner rather than later. Dealing with family can be tough, just stick to the numbers and do what you need to do for you. your aunt will be okay.
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Old 04-13-2019, 07:58 AM   #17 (permalink)
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We just converted a 17.5 year adjustable to fixed 15 years at 3.5. Happy as shit. Saved 3.5 years payments too.
When we bought our house we got a 15 year instead of a 30 year and the payments were only about 40% higher. Now we have 10 years left instead of 25 years and that feels nice.
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Old 04-13-2019, 08:49 AM   #18 (permalink)
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Local rent is way out of line with buying, probably 1400 vs 1000 mortgage.

Fix up would be less than 5k, mostly paint and updating some fixtures.

This exact location, with my schools and family nearby saves me childcare $, and if I move from here, to my property in 2 years, it saves me the expense, and lost wages of another move.

Sooo, there is financial incentive to stay here.

The 5.3% sucks, but if it's for 2 years, and I skipped the mortgage fees by assuming, it might be a wash

As far as if the market turned and I got stuck here, it's not a bad house or area, it's something I could live in longer, or rent, just not what I really want in 5 years.


I'll start making calls
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Old 04-13-2019, 09:13 AM   #19 (permalink)
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Just came in to say don't get a 30 year loan.
It is best to get a 30 year loan because you will have the lowest payments. Most all loans these days don't have any early payoff penaltys. So getting a long mortgage does not preclude you from paying it off in ten years. But if you have a setback, you can revert to the minimum payment. (Rather than lose the house and credit)

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Assuming it'll actually sell for $185k, you'll be paying $11.1k in commission when you sell it, assuming you use a traditional broker. How much are you going to have to put in to it to fix it up to sell over the next 2 years? What if the market tanks before then? Would you rather be stuck in a place you like or this place?

If you can get a loan for this one, you can get a loan for another place that suits you better. The little bit of potential upside doesn't seem worth the risk.
This is pretty much my thought. I have to say buying is not recommended unless you are planning to stay longer than two years. (Five is better)
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Old 04-13-2019, 12:07 PM   #20 (permalink)
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It is best to get a 30 year loan because you will have the lowest payments. Most all loans these days don't have any early payoff penaltys. So getting a long mortgage does not preclude you from paying it off in ten years. But if you have a setback, you can revert to the minimum payment. (Rather than lose the house and credit)
I disagree. You should be buying a cheaper house if you anticipate a risk of cutting it that close.

Closing costs are significantly lower with a 15 year and the interest rates are also significantly lower. At least they were for me.

The closing cost savings alone was about equal to the difference in payments for the first two years for me.


Paying off a 200k 30 year loan in 15 years is an extra $50/month payment plus the extra closing costs.
It's about an extra $10k wasted over the life of the loan.
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Old 04-13-2019, 12:13 PM   #21 (permalink)
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I'm with the horse fucker on the 30 year. I pay huge extra payments every month so the actual interest I pay is way less but it's nice to have the option to go back to a normal payment if there are significant expenses or medical problems.
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Old 04-13-2019, 09:26 PM   #22 (permalink)
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I disagree. You should be buying a cheaper house if you anticipate a risk of cutting it that close.

Closing costs are significantly lower with a 15 year and the interest rates are also significantly lower. At least they were for me.

The closing cost savings alone was about equal to the difference in payments for the first two years for me.


Paying off a 200k 30 year loan in 15 years is an extra $50/month payment plus the extra closing costs.
It's about an extra $10k wasted over the life of the loan.
An extra $50 a month? And you think I'm cutting it close? The last mortgage I paid an extra $2,000-$2,500 a month.

Also, if you want low closing costs, make sure you make a big enough down payment to forego mortgage insurance. (20 percent)
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Old 04-14-2019, 08:02 AM   #23 (permalink)
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An extra $50 a month? And you think I'm cutting it close? The last mortgage I paid an extra $2,000-$2,500 a month.

Also, if you want low closing costs, make sure you make a big enough down payment to forego mortgage insurance. (20 percent)
$50/month free money buys a cheap hooker and some cut crack at the end of the year.
I don't like to waste money just to have the option to pay a few hundred less a month if I needed.
Each person has their own situation, they just need to make sure they run the numbers.
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Old 04-14-2019, 08:16 AM   #24 (permalink)
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I'd pull up a mortgage calculator and look at an amortization table. Check and see if the numbers work out.

Everyone is trying to convince me to buy here and I don't see how the numbers work out. 99% chance the next economic down turn I'm laid off we are moving out of state, $0 money for a down payment (killing debt right now). $1450 a month Rent vs. 0 down mortgage on 300k + you'd have to build a lot of equity for it to work out. When the economy dries up I don't see renters lining up to spend 2k + a month on a 2 bedroom shit hole while I'm out of state working.

Waterhorses plan works great if you are good with money. If you are an average American who can't budget most drag it out and never get around to making the extra payments.
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Old 04-14-2019, 11:13 AM   #25 (permalink)
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I'm with Waterhead on the 30 yr loan & paying extra every month. And to lower closing fees, put down a larger down payment-
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