Buy house with cash then finance

Asked by Khazimotu, Chicago, IL Sat Jul 27, 2013

Person A is trying to buy a condo in Illinois. Person A has put an offer in and property is under contract. For various reasons Person A will not qualify for a loan immediately (within the 30 day period). Person A will qualify for the loan within 3 months. Person A has good income history, excellent credit, no other debt. Everything is good enough to easily qualify for a mortgage of the amount $200k.

Option 1
Mother in law purchase property with cash.
Then sells to Person A after 2-4 months once Person A will qualify for loan
Person A finances the property as if it were like any other sale, putting 20% down etc.

- Is there a 'vesting period' during which the property cannot be resold?
- Is there restriction on selling property from Mother-in-law to Person A?
- If Mother in law sells to Person A are there any penalties or fees to be added to the mortgage?


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Bill J Deligiannis’ answer
Bill J Delig…, Agent, Naperville, IL
Mon Jul 29, 2013
If this is THE home for you, then some possible inexpensive options are:

1) You on Title - Mother in Law provides financing (She is the BANK) - record the loan and then pay her off over time or until your refinance the property 6 months down the road.

2) Both of you buy it together - 6 months down the road quit claim her off the loan

Feel free to contact me should you need any assistance.
Web Reference:
0 votes
Jacqueline S…, Agent, Chicago, IL
Sat Jul 27, 2013
If your mother-in-law buys and then sells to you, you will have to pay transfer fees twice and they are LARGE. Plus, on the repurchase you will be covering both the buyer and seller transfer costs. You can buy and sale the unit in the same day, as long as it is not bank owned and the bank has not added limits to when a resale can happen. Some bank do 30, some do 90.

It is a legal transaction as long as it is not a short sale that one of you already own, as them must be arms-length transactions between unrelated parties.

Options to avoid double transfer tax:
-Private money loan from mother-in-law. Record the loan, then refinance to avoid transfer fees
-Negotiate a longer time to close by paying a fee to move the closing date. You could pay rent on the unit until you close.
-Clear up why you cannot qualify for 3 months
-Buy a different property in a few months, if they will not postpone the closing date.
1 vote
People never realize how expensive closing costs are. The transfer taxes are a killer in Cook County. On the repurchase you can double that of the closing since you would be the buyer and seller.
Flag Sat Jul 27, 2013
Sounds like getting the loan from the mother in law for the full amount of the property and then refinancing the property as soon as possible to repay the mother in law is the cleanest and easiest way. No additional transaction fees, closing costs, etc. Just the cost of doing the finance and closing on the house in the first place.
Flag Sat Jul 27, 2013
Sam Sharp, Mortgage Broker Or Lender, Chicago, IL
Sat Jul 27, 2013
Ivan has a good idea - if both entities are on title then person A will be able to refinance the property into just their name and you will avoid the additional fees associated with a purchase - but they will not be able to cash out for 6 months after the purchase
So- no vesting period to sell. But the fees are something to consider If they want to take care of this in less than 6 months. Please feel free to contact me directly with any further questions.
Sam Sharp
Senior VP of Mortgage Lending
Guaranteed Rate
1 vote
Ivan Sagel, Agent, Chicago, IL
Sat Jul 27, 2013
I would put both people on title from day one. Then later quit claim off the mother in law and refinance when you can.

Best regards,

Ivan Sagel
1 vote
Evelyn S. Fr…, Agent, Chicago, IL
Mon Jul 29, 2013
Sam Sharpe has the best and most explicit response. He is a lender and can help your son in law not only secure the loan but will make the process easier to understand and a smooth transition.

Good luck!
0 votes
Joe Schiller, Agent, Chicago, IL
Mon Jul 29, 2013
if you cannot afford a house you should not buy it
0 votes
That is not actually what he said.
Flag Mon Jul 29, 2013
Manuel Brown, Agent, Chicago, IL
Mon Jul 29, 2013

That is a lot of paper flipping. Your biggest hangup is if it is a large condominium building you are going to be faced with paying the condominium association fees twice, you will be paying for two appraisals.

I cannot imagine any home loans today that have an early payment penalty. Talk to your lender to be sure.
0 votes
Sohail Salah…, Agent, Chicago, IL
Sat Jul 27, 2013
There are always options, creativity is a must when it comes to tricky deals.

Sohail A. Salahuddin | Founder and Team Leader

Innovative Property Consultants Group | Sales and Leasing

Jameson Sotheby’s International Realty

425 W. North Ave. | Chicago, IL 60610

O: 312.335.3230 | C: 312.437.7799 | F: 847.805.6030

"Extraordinary Service For Extraordinary Lives"
0 votes
Philip Sencer, Agent, Chicago, IL
Sat Jul 27, 2013
You need to speak with a few lenders to see what they say. My web site has some references if you need them. If you are buying an REO owned by the bank they do tend to have a time frame 3-6mo when you cannot sell (flip) it.
0 votes
Martin Sanch…, Agent, Chicago, IL
Sat Jul 27, 2013
Add mother in law to contract, change the terms to cash, close on the property then refinance the son in law as soon as he is able to and quick claim the interest from mother in law to son in law. This way
is the easiest.
0 votes
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