Home Buying in Santa Rosa>Question Details

Taphabit, Home Buyer in Santa Rosa, CA

Whats the best way for a first time home buyer, to obtain a home with help from my parents?

Asked by Taphabit, Santa Rosa, CA Sun May 6, 2012

I am 31, self employed making 35k yr. My credit score is around 600 (not the best, but no outstanding credit debt or loans). I have a young IRA account that has around 30k. The problem is I have been unable to get a loan since my employment is new (1yr) and my poor credit score. MY parents are retired but have done rather well, have excellent credit and have quite a bit of financial security. MY dad refuses to take the loan out in HIS name, but really wants to help me buy my first house.

We've discussed him purchasing the home and renting it to me, although he doesnt want to do that for various reasons.

Would he be able to buy the house and then gift it to me? and have me pay him back later on in life.

any advice on this situation would be greatly appreciated, it's a great time to buy in sonoma county.

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Robert Chomentowski’s answer
You parents could buy the home cash and then carry back a mortgage for you at say 4-5%. This way they could get a higher return than a CD but also help you out. They could also be non-occupant co-borrowers with you on a low down FHA loan. But I suggest speaking to a loan officer about trying to get your credit score up to 640, that will make the loan process much smoother and get you a better rate. There are many quick things you can do to raise your score. Lastly, if you can get your score up to 660 there is a conventional loan with 20% down and no mortgage insurance that would allow your parents to be non-occupant co-borrowers.

1 vote Thank Flag Link Mon May 7, 2012
I work with a lot of people who have less than perfect credit. I tell all my clients that need a pre approval to visit The Lenders Network, I have seen loan approvals from them even with scores under a 600. So if anyone can get you a loan they can.

Good luck to you!
2 votes Thank Flag Link Wed Jul 31, 2013
There is a variety of ways that people take advantage of the generosity of family such as your situation. My advice is to sit down with a good loan broker, and an estate planner for your parents, and perhaps talk to both of your tax accountants. Your parents may be interested in setting up a family trust or rental property, or just lend you money! All the options have different consequences and effects depending on yours and your parents specific tax brackets and financial situations. thats why you need to talk to as many financial professionals as you can to sort out all your options.
1 vote Thank Flag Link Sun May 6, 2012
You need to shop around for a mortgage broker, they have access to many banks, private lenders and many different programs. Choose one that can answer all your questions on the first meeting.

Best of Luck,

Maria Cipollone

Century 21 Tenace

0 votes Thank Flag Link Sun Dec 2, 2012
You say that your parents have done "well" and have "Financial Security". That means they have worked hard to achieve this stability. Although I am sure they want you to have the same results, they have seen some ups and downs in the economy. My suggestion is to ask your parents to discuss some ideas with their tax accountant and they probably also have a trust or will. These are people that your parents have developed a relationship of trust with, and I think it makes sense to start there and see what suggestions they can bring into the mix to see if there are ways to help you achieve your goal, and for them to also derive some benefit and feelings of security. Buying a home is always best done as a team approach. And of course, part of the team will be a lender to see what price home you will be able to afford payment, and a realtor to see what's available in that range. "Window Shopping" is helpful, to get an idea of what is realistically available. I would be happy to show you some homes and your parents too! Best, Terry Bell, CPS Real Estate, Santa Rosa and Sonoma County. 707-292-5712 TerryinSR@aol.com
0 votes Thank Flag Link Sun Dec 2, 2012
What did you do prior to your current job? Give me a call and we'll see what we can do to improve your credit score a bit and get you ready to buy.

Scott Lawson
0 votes Thank Flag Link Sun Dec 2, 2012
Thanks Robert, your reply was very helpful. I have already got underway with a credit repair company to get back up to my original 680-700 within a few months. Unfortunately my 'rents don't want to be on the mortgage even as co-borrowers. They will however, let me borrow (gift) 26k a year for this year and next.

So this time next year, I will have a credit score of 700, 2 yrs at my new employment making 35-45k. An IRA that's matured to around 40, and 52k in a saving account.

At this point is a 350k house in santa rosa obtainable? even with a substantial down payment?
If that's the case I will just get my chips in a line a prepare to make this move at this same time next year. Does that sound more reasonable?
0 votes Thank Flag Link Tue May 8, 2012
You would have to pay tax on the gift as regular income. They would need to talk to their accountant and so would you. They could give you a loan in second position to the first loan at a lower interest rate because you would have to qualify for both payments.
0 votes Thank Flag Link Mon May 7, 2012
If I was "Gifted" 200k, would it then be possible for me to qualify and purchase a home around 350? That may be an option
0 votes Thank Flag Link Mon May 7, 2012
I had another idea, are your parents well off enough to be the bank? If you started with a condo, up to $150, they could get a much better rate of return than the bank or stock market offers. The title company can draw up the documents. This way only the property need qualify, sell quickly if things go south.
0 votes Thank Flag Link Mon May 7, 2012
I have bad news, you need two year work history. An FHA loan only requires 3.5% downpayment but you have to pay mortgage insurance. This can be all gift money. You will take an interest bump up for your low credit score and I do believe they have a minimum.credit score but verify. Maybe there is an error on your credit or something you can do immediately to fix it. You can talk to my lender, she is excellent and goes the distance for her clients, Linda Drexler 707-799-4656. Also make sure you are reporting your highest income on tax returns which is difficult when you are self employed. I believe your parents can be on title with you without having an impact on their taxes. Hang in there, get your paperwork to your lender now and be ready to go, to catch the low interest rates as soon as you qualify.
0 votes Thank Flag Link Mon May 7, 2012
I would consider offering naming rights of your first child to your parents. It works for major league stadiums...
0 votes Thank Flag Link Sun May 6, 2012
Your first step is to talk to an experienced Mortgage loan broker to explore the options open to you. They can also meet with you and your parents to see if something can be structured that meets both your needs. FHA may be an option - I understand they are less concerned about high credit scores. I do hope you are taking steps to get your credit score up - paying all bills on time, etc. Also important not to make any major purchases - car, appliances, etc -until you have closed escrow on your new home. Call or email me if you like. I can give you the names of some good lenders.
0 votes Thank Flag Link Sun May 6, 2012
also should add that I will be living with my gilfriend of 9 yrs who makes 35k yr as well. She wouldn't be on the loan, but didn't know if that would change anything. (she could be if it mattered but we choose not to)

Also, I plan on making more money this year then last year so monthly payments up to 2k could be easily afforded.
0 votes Thank Flag Link Sun May 6, 2012
Thanks for the quick replies! Terry you suggested that they could just lend me the money. If the case was I could get approved for lets say a 100k loan, how could they "lend" me 200k to purchase a 300k home? assuming they had 200k to lend. If that could work, is it possible for me to get approved for 100k home loan given my situation?

also thanks glen, i may call you, but is there anyone reccomended on here to speak with about getting a loan for someone like me? (aka bad credit, low self employed income)
0 votes Thank Flag Link Sun May 6, 2012
Speak with knowledgeable lender. Call me on my cell and I will give you a couple of names. 217-6319, Glenn
0 votes Thank Flag Link Sun May 6, 2012
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