Home Buying in Honolulu>Question Details

Cassandra, Home Buyer in Honolulu, HI

I'm trying to buy my parents' house which is non-conforming, so I cannot take out a conventional loan. How should I buy the house?

Asked by Cassandra, Honolulu, HI Thu Jul 11, 2013

They have $450k left on the mortgage so I could take over that mortgage and pay my 4 siblings off the leftover $200k to buy the house at its appraised price. But how would the ownership/title transfer occur?

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The way I am understanding this, your parents home is worth $650,000 and they have a remaining mortgage balance of $450,000. You would lie to get a 100% loan to value, so you can buy out your parents and pay off $200k to your siblings. If all this is correct:

It will be difficult to get a 100% loan on a non-conforming home. If the issue is lack of building permits, work with a contractor to get the area(s) permitted and closed. It may cost a couple thousand dollars, but it is well worth it. Check with a lender to find out what programs are available for the area (ie, VA, USDA, Hula Mae, etc.) If our parents current interest rates are higher than today's rate (about 4.75%) then you may be able to get a much lower payment.

Another possibility is to talk with your parents to add you to the title of the house and take tenancy as Joint Tenancy. That way, when they pass away, it will automatically transfer to you (pending any trusts). Then, you take over the mortgage payments. Create a contract with your siblings to buy them out for the $200,000. Find out if you can get a cash out refi on the house (if there is enough equity), or maybe just borrow $100,000 for now, with the balance due in 5-10 years. Historically, most Hawaii properties appreciate 30-80% (depending on location) over the course of 10 years.

Ownership, Title and Transfer would be taken care of in Escrow.
2 votes Thank Flag Link Sat Jul 13, 2013
In Escrow the attorney will documents to transfer title as your siblings sign off you paid them. See a Real Estate attorney for advice.
1 vote Thank Flag Link Sat Jul 13, 2013
All in Escrow! Title and ownership can easily be changed in escrow. If your keeping the home you have the money yes you can simply all go to escrow to have it done. Now if you want to sell or get a loan it depends what you mean when you say nonconforming. Please feel free to call me, I will glady directly assist you with no fee. My number is 808-478-4981. Aloha, Kristi K Tanaka, Broker in Charge
1 vote Thank Flag Link Thu Jul 11, 2013
We don't have enough money to purchase the entire house. We would still be short about $450k, so we would need some kind of a loan, or to take over their mortgage. Nonconforming--house is split into two different units; two entrances; two kitchens; renters in both. I've heard of portfolio loans... is that an option?
Flag Fri Jul 12, 2013
Hi Cassandra,
1. To cover both yourself, your parents and your siblings, see an Attorney and a CPA
2. Non-conforming usually pertains to the home not conforming to the current standards or rules, perhaps a bathroom or bedroom was added. Find out where the Non-Conforming issue is and try to remedy it by contacting the City and County of Honolulu, DPP.
3. Talk to the lender, Loans these days are normally not transferrable so you would have to qualify for a 70% LTV loan and also show the ability to make the other payments to your siblings. Also, to get the loan the lender most likely would want you to remedy the "Non-Conforming" issue.
4. You most likely would be able to go on title with your parents, but your parents most likely would get the tax deduction, here again my recommendation is, you should consult a Real Estate Attorney and CPA.

Good Luck,
Edgar Miner, RA
Gloria Chi Realty, Inc.
808-372-8599
1 vote Thank Flag Link Thu Jul 11, 2013
The non-conforming issue is an illegal split of the house. I wish to keep the house in its current condition so I can rent it out to help with mortgage payments. Is there any other type of loan I can take?
Flag Thu Jul 11, 2013
Hi Cassandra,
What do you mean that the house is non-conforming? Is there something messed up with the house? Or do you just mean that since they owe more than $417,000 you cannot take out a conventional loan?

Actually, Honolulu is what's referred to as a high-cost area, So if the home is located there then you may be able to get a "jumbo conforming" loan. The limit there is $721,050.

I'd probably need a few more details to provide you with some options, but I'm more than happy to review things with you if you want to give me a call or email me

Tony

Tony Grech
Loan Officer -NMLS #977416

WCS Lending, LLC
Tony.Grech@WCSLending.com
Toll Free: 866.936.5363 ext. 278
0 votes Thank Flag Link Thu Jul 11, 2013
It is a 5 bedroom, 3 bathroom house, which since we've (the kids) all grown up and moved out, my parents had illegally split into two different units: a 3 bdrm/2 bath and a 2 bdrm/1 bath. The other unit was rented out to help pay off the mortgage. Now that my parents have passed away, my siblings simply want to sell the house and get their share. My parents had refinanced earlier so there's still a lot left on the mortgage: $450k; house's value is approx. $750k, but because it would cost more $ to un-split the units and make it conforming, its appraised price was $650k. I want to keep the house the way it is to help pay for the mortgage, so I don't want to have the house conforming; it would just cost me more money to fix it (make conforming) and then put it back to its current condition (non-conforming but rentable). I simply want to purchase the house and pay off the title. I am capable of paying off my siblings, and the additional rental income will help me pay the mortgage.
Flag Thu Jul 11, 2013
Great question. I would encourage the family to settle first.
0 votes Thank Flag Link Thu Jul 11, 2013
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