Real estate/co-signing Q

[MissHell]

Wondering if there is anything either/both parties need to be aware of...

Situation is Heather has 2 homes/2 mortgages. She wants to sell one house for what she owes (less than market value) to her friend Sandy.

Options are:
1. Heather can re-finance loan to make it assumable. Sandy takes over the loan.

2. Sandy can apply for loan to buy home, but has no down payment. Heather will co-sign and sign the title to the house over to Sandy.

[Particle Man]

are they hot?






(j/k, I have no idea)

[Trip]

assumable one sounds like less work for Sandy.

[Rider]

Originally Posted by MissHell

Wondering if there is anything either/both parties need to be aware of...

Situation is Heather has 2 homes/2 mortgages. She wants to sell one house for what she owes (less than market value) to her friend Sandy.

Options are:
1. Heather can re-finance loan to make it assumable. Sandy takes over the loan.

2. Sandy can apply for loan to buy home, but has no down payment. Heather will co-sign and sign the title to the house over to Sandy.

If you cosign and Sandy defaults. You are liable. Might as well just do a rent to own with a $5K deposit.

[ducati_atx]

There are programs (80/20) for example which allow for no down payment.

One should be careful about co-signing for a loan to a "friend" who from the very very brief description sounds like the 2nd person cant afford on their own. This (again, Im not throwing rocks) sounds like what got us into the mortgage mess in the first place.

If I were the owner - I would try to get the new buyer to get a home loan on their own so their is no liability left to me. What if she defaults and you are a co-signer? What if she doesnt assume the assumable loan (which probably has a higher interest rate.)?

[Papa_Complex]

Co-sign = bad. Very, very bad.

[shmike]

Originally Posted by ducati_atx

There are programs (80/20) for example which allow for no down payment.

One should be careful about co-signing for a loan to a "friend" who from the very very brief description sounds like the 2nd person cant afford on their own. This (again, Im not throwing rocks) sounds like what got us into the mortgage mess in the first place.

If I were the owner - I would try to get the new buyer to get a home loan on their own so their is no liability left to me. What if she defaults and you are a co-signer? What if she doesnt assume the assumable loan (which probably has a higher interest rate.)?

Originally Posted by Papa_Complex

Co-sign = bad. Very, very bad.

Plus 2!

If Sandy can afford the house, Sandy should get a mortgage.

Heather would be a fool to go with either option. Why re-fi to just hand it over?

Sell the place to someone with the money or rent to own like Rider mentioned.

[ducati_atx]

Originally Posted by shmike

Plus 2!

If Sandy can afford the house, Sandy should get a mortgage.

Heather would be a fool to go with either option. Why re-fi to just hand it over?

Sell the place to someone with the money or rent to own like Rider mentioned.

another good option could be lease to own.... (if someone is really in a bind to sell their property prior to they themselves getting foreclosed on)

Basically you sign a 2 year lease agreement at a slightly higher rental rate.... upon termination of the lease they can buy the house at a price set up front. If they dont close on the lease, they lose their deposit as well as the rent already paid.

My mother did this with a house and ended up making 5-7% more on the transaction by the time she had a 2 year lease agreement up front.... plus no issues with foreclosure.

[shmike]

Originally Posted by ducati_atx

another good option could be lease to own.... (if someone is really in a bind to sell their property prior to they themselves getting foreclosed on)

Basically you sign a 2 year lease agreement at a slightly higher rental rate.... upon termination of the lease they can buy the house at a price set up front. If they dont close on the lease, they lose their deposit as well as the rent already paid.

My mother did this with a house and ended up making 5-7% more on the transaction by the time she had a 2 year lease agreement up front.... plus no issues with foreclosure.

Agreed.

aka

Lease option.

I was thinking of that but forgot the term.

[smileyman]

If you want to help Sandy by co signing just know that you are personally responsible for that debt and it will be on your credit bureau. That effects your ability to get any future credit even if it is paid on time since it is an outstanding contingent liability and therefore effects your debt to income ratio.

Best option is to get Sandy to find financing that doesn't involve you.

Second best is leave it in your name with your preferred financing, then lease with option or lease to own to Sandy (or sell under contract) giving yourself a tax shelter on the lease income. Do not transfer ownership untill your paid in full.