My brother does not wants to lose his home. What are my options?
by Mortgage Rates on Monday, November 8th, 2010 | 5 Comments
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If your brother quitclaims the house to you, you can make the monthly payment on his loan. As long as the payment is always current, the lender should not care. You will pay a small transfer fee and recording fee to the county, and you want to ensure that you show the sales price at the mortgage balance. Since you are probably getting the property for less than the current assessed value, you may want to skip noting to the county that you are related to each other (they may not notice that your last names are the same).
If the lender is escrowing the homeowner’s insurance, you will need to confirm that the payment is being properly billed and credited each year between your lender and your agent. This can sometimes cause problems with a transfer of ownership.
If the lender has a due-on-sale clause in the mortgage contract (highly likely), the lender could force you to pay the full balance of the mortgage if they find out that the property has been transferred. They usually don’t, but they could.
Make sure that you are never late on a payment, and these other issues should be a minor inconvenience. Keep in mind that this mortgage will continue to appear on your brother’s credit report, and it will not appear on yours.
You and your brother will have to work out the tax issues with regard to mortgage interest and property taxes, as he will receive the Form 1098 for them each year. Your tax preparer can make the adjustment for each of you. Just make sure that you are not both claiming the same deductions, or the IRS will definitely give you fits.
Keep copies of your cancelled checks or electronic withdrawals for the payments, because this can help you in 12 or 24 months, when you want to refinance the house into your name.
If your brother signs a QuitClaim Deed, and you don’t record it, the lender will not be a problem for you, but you may run into seasoning issues with a new lender after you do record it. You might decide to wait until after the homeowner’s insurance renews, and record it then, if you are worried about tipping off the lender to the sale.
Good luck!
Why not just rent the home leaving the finances as they are. Does it matter who owns the home as long as the bills are paid???
Just do a land contract.
Take over payments subject to the mortgage remaining in place.
Have him sign over title.
Have him give you 36 months to refi out and get him out of the deal.
The banks won’t care as long as they’re getting payments, they have things to deal with then you violating the due on sale clause.
Of course this is oversimplified, but easy to do.
Consult your local real estate investors club or a r.e. attorney.
This is how investors get properties all the time.
P.S. be sure to add an equity purchase contract as well to cover our A$$.
Phillip – the danger in having the deed quit claimed over to you is that the lender may enact a due on sale clause, causing the mortgage to become due and payable in its entirety in 30 days. It is unlikely your credit will be cleaned up sufficiently that fast. It is a risk that I don’t think you should take.
A land sale contract or other type of sale contract is a much better idea. Ownership stays in your brothers name, you make the payment and this gives you time to clean up your credit, then obtain your own mortgage down the road. Give yourself at least 2 years.
EDIT: Don’t obtain some canned contract off the ‘net, have an attorney write this for your so everyone’s interests are protected, including your brothers. These types of handshake agreements with flimsy contracts cause people to stop speaking and going to the reunions, so get it written by a pro. It’s worth the money.
1. Look at the mortgage document for a due on sale clause or assumability clause. If this is a Deed of Trust do the same thing.
2. Can your brother rent the house out?