Home Buying in Oak Hill>Question Details

Karenkiarulff, Home Buyer in Chatham, NY

Should my son buy us a home,rent it to us, then we buy it back in 2 yrs.?

Asked by Karenkiarulff, Chatham, NY Tue Jul 23, 2013

My son is worried that it will reflect as a debt when/if he wants to buy a home for himself. His credit score is 780. He is a retired, disabled veteran living in an apt. in CA. We are almost done with the mortgage process and it occurred to him that this may reflect badly on his debt to income ratio. I think it is an investment and we will pay him double mortgage payments and also sign a lease. Our mortgage would only be $423 a mth. We had a series of setbacks since Sept. and our credit suffered. Any help you can give is appreciated!

Help the community by answering this question:

Answers

2
It will impact his debt to income ratio if he goes to buy a house.

Rental income may be used to offset a mortgage liability though. If he wants to buy a home this year, then he will have to provide a signed lease along with cancelled checks for rent. DO NOT EVER give him cash! Always pay via check or money order and have him make copies of all checks received. If he wants to buy NEXT YEAR he will have to file a tax return and report the income on schedule E. He'll need to have all his t's crossed and i's dotted though, because an underwriter may not like that the home is rented to relatives. That may raise some red flags so please be prepared and keep a paper trail of everything.

Also, make sure he is not claiming to occupy the home on his mortgage application. This should be financed as a rental property.

Finally, I'm presuming he will want to use his VA eligibility to purchase a home of his own. Please make sure he is not using it on this home, since that will preclude him from using it when he buys his own home.

Hope this helps!
Tony
0 votes Thank Flag Link Wed Jul 24, 2013
Thanks for you input Tony. He will use his VA to purchase a home of his own when the time comes. We looked into using his VA however he would of had to live in the house he bought. We didn't want to break any laws. We will certainly keep tract of canceled checks. It's is good idea! Thanks for all your comments. Karen
Flag Sun Jul 28, 2013
As long as he can show a valid lease, when he goes to buy the lender may use some or all of the proceeds to count towards his debt to income ratio.
It is a great investment opportunity, tax write off, and may in fact increase his credit score. Buying a house and paying on time builds credit.
0 votes Thank Flag Link Tue Jul 23, 2013
Thank you for your answer!!!! He is stressed. He drove his wonderful Prius from CA to Maine with his 2 little boys. Filled up twice! He is disabled (missing a leg), divorced, and has 100% custody of his boys. Only gets disability checks for now but has a great sense for saving etc. He thinks he will want to buy a house in the next 3 yrs. He lived in Japan 13 yrs. He loved it, but he loves CA because the weather. He doesn't want to trudge around in ice with his bad leg. Once again, thanks for being so clear with your answer!
Flag Wed Jul 24, 2013
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2016 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer