Financing in Methuen>Question Details

Stovepiper21, Home Buyer in Williamstown, MA

Parents having financial difficulty - can 3 children group together to purchase their home? The 3 kids already have homes, this would be an investment

Asked by Stovepiper21, Williamstown, MA Tue Oct 26, 2010

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Robin- on a conventional loan for a second residence (as all three adult children already have a primary residence there is no requirement that I am aware of requiring them to live in the residence.
The life estate is created after the fact with the help of a Real Estate Attorney.
The other option is an Illinois Land Trust in which the children are trustees. (also created with the help of an attorney) We have seen these becoming more common as well and they can be financed suvccessfully as I have also seen.
0 votes Thank Flag Link Wed Oct 27, 2010
Allison, if there is a life estate, it is very difficult to get financing. I would not suggest that to someone without them consulting an attorney who is familiar with elderlaw issues.
0 votes Thank Flag Link Wed Oct 27, 2010
Stovepiper,

I would say the answer to your question is yes. I would consult with an attorney first to make sure that they agree. but you can. the other option is when dad is working again he buys the house back from the kids.

You mention dad had been making payments for 30+ years. Is dad nearing retirement or getting any type of pension? That can factor into his income.
Web Reference: http://www.davedicecco.com
0 votes Thank Flag Link Wed Oct 27, 2010
Refinancing sounds difficult at best for your father. There may be a way to work it so that he has control of the property, but someone else is on the mortgage. I would seek legal counsel for a plan, then seek out a lender that will work within the plan. So many pieces it will be difficult to get accurate advice without a solid knowledge of estate law.
0 votes Thank Flag Link Wed Oct 27, 2010
To give a little more info...parents do have a current mortgage with approximately $200,000 in equity. Refinancing was the first option to take about $50K out and lower monthly payment....tried this, but in the process, Dad was laid off. and underwriter called to say they heard he was currently unemployed, so refinancing did not go through even with perfect credit, significant equity, and 30+ years of on-time mortgage payments. Frustrating. The house needs some updating and is not ready for sale. So I'm just trying to think of other options and thought of this. They have 3 children that all have current primary homes/mortgages...none of which would be approved for a 2nd mortgage on their own by any bank...so I just wondered if all 3 children (and their spouses) could somehow combine together on a loan and possibly get approved that way? It sounds like, from the responses I got, that there is a possibility of this. Dad would prefer to keep the house in his name and get the refinancing, but I don't see how this will happen if he was denied because he got laid off.
0 votes Thank Flag Link Wed Oct 27, 2010
The answer is Yes, the children can pool their funds and buy the home- they can have "Tenacy in Common"- in which all children would have an equal interest (shares) giving the parents a life estate.
Tenacy in Common can be any number of people. Each may hold different percentages of ownership in the property (depending on their contribution to the purchase price) A tennant in common's interest may be transfered or inherited. (In which the heir receives the interest in the property. Which means it can be transfered to the Grandchildren at some point in the future.
0 votes Thank Flag Link Wed Oct 27, 2010
Not to over complicate this, BUT this may be a good time to set up a trust to protect and clarify your parents' estate. No matter how big or small having a plan is extremely helpful and not expensive. Seek out a qualified estate planning attorney. If you need a referral let me know. It is great you can help out your folks. Good luck.
0 votes Thank Flag Link Wed Oct 27, 2010
Stovepiper21

Couple of questions, do they own it free and clear of a mortgage?

I would recommend, not that I'm your attorney or accountant, that they gift the home to the children, as they are entitled to a 1,000,000 lifetime gift, that way avoiding capital gains and taxes. The children could then take out an equity loan or a mortgage to pay for the folks. But check with your attorney and accountant.
0 votes Thank Flag Link Tue Oct 26, 2010
Sorry to hear about your parent's troubles. That is a possibility, but I think that all of the purchasers would need to apply for a mortgage together and all credit reports would be run an income and debt would be considered. I can recommend some mortgage brokers if you are interested. Mortgage brokers would be a good place to start.
Web Reference: http://Teamlefebvre.net
0 votes Thank Flag Link Tue Oct 26, 2010
Hi, this question is probably most easily answered by saying yes assuming they either have the money to purchase it in cash or they have the ability to qualify for a mortgage. They may not want to consider it an investment property since investors typically pay a higher rate and require more of a downpayment. I would speak to a residential mortgage specialist and tell them the situation openly and see what product they suggest if in fact a mortgage is needed.
Best of luck.
Web Reference: http://www.route495.com
0 votes Thank Flag Link Tue Oct 26, 2010
Possibly. It will depend on the circumstances of the purchase. A couple things to keep in mind: (1) Will the children qualify for a second property loan since they already own their own residence (2) Will the property need to be sold in a "short sale" (having the bank accept less than is currently owed on the home) (3) Can the loan be refinanced to make it more affordable to the parents without having the children buy it? I would be happy to talk to you about your options and point in the right direction. Feel free to give me a call 978-984-3107. Mark Gracy - The Gracy Team - Keller Williams Realty.
Web Reference: http://www.gracyteam.com
0 votes Thank Flag Link Tue Oct 26, 2010
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