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CA renter.
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January 31, 2015 at 8:46 PM #21393January 31, 2015 at 9:58 PM #782488
svelteParticipantLots of info missing.
Where would you be buying?
How long would you plan on staying in the house you would purchase?
January 31, 2015 at 10:10 PM #782489TexasLine
ParticipantThank you for responding.
I would be buying in the Mt. Helix/Rancho San Diego/S.E El Cajon area.
How long would I be staying in the house? …great question. I have of child in 9th grade, one in 7th grade and one in 5th grade in local schools.
I would be staying long term.
You stated ” lots of info missing”. But honestly the true question is whether or not its best to pull out equity from my mothers Living Trust properties or simply sell them for profit and use these fund for the down payment.
January 31, 2015 at 11:04 PM #782490HLS
ParticipantYour question is a bit complicated,
If you want to contact me privately I can discuss
possible options with you. I’m Realtor & mortgage guy.
YOU cannot borrow money on your mother’s houses.
(Perhaps she can if she qualifies)If you are a salaried employee, you get no extra credit for being at a job for 10 years, in many cases 30 days is enough.
If your MID credit score is 740 or above, in most cases it makes no difference if your credit score is 760, 800 or 840.
It’s all about qualifying and understanding what it takes to qualify.
In many cases it’s easier for someone with 3% down to qualify than someone who is putting 50% down.
The system is broken and it’s not going to change anytime soon.January 31, 2015 at 11:21 PM #782493FlyerInHi
GuestI was just thinking that the trust situation is complex.
The houses would first have to get transferred out of the trust to the individual borrower, otherwise, he/she cannot borrowed on them.
January 31, 2015 at 11:32 PM #782494Participant[quote=FlyerInHi]I was just thinking that the trust situation is complex.
The houses would first have to get transferred out of the trust to the individual borrower, otherwise, he/she cannot borrowed on them.[/quote]
NONSENSE, that’s not true!
February 1, 2015 at 10:12 AM #782500GuestSo how would the son use his mom’s houses as collateral? If he owned the houses, he could. No?
My experience is if title is held in a trust, you first have to transfer the house to the individual, refinance, then quit claim to the trust.
That’s because lien priority is first come first served as far as recording is concerned.
February 1, 2015 at 9:08 PM #782520ParticipantWow. I guess this is more complicated than I thought.
My mother would not be able to qualify. She is handicapped and has no job. She would, in theory, move in with us and we would use her properties to leverage as down payment for the house we would all live in…so I guess she would need to take out equity and give that money to me which I would then use as a down payment? I think there are severe tax penalties for doing this, which I of course would want to avoid.
But to simplify, I still am not sure of the basic principle of whether or not one should take out equity or simply sell the property for a down payment.
Do all brokers posses the knowledge to deal with this kind of issue?
February 1, 2015 at 9:18 PM #782523spdrun
ParticipantWhy can’t you co-sign the mortgages against existing properties then purchase the new property jointly, also co-signing the note?
February 2, 2015 at 3:00 AM #782525
CoronitaParticipant[quote=FlyerInHi]So how would the son use his mom’s houses as collateral? If he owned the houses, he could. No?
[/quote]He doesn’t own the home. His mom is still alive and it’s her property. He is a beneficiary, and when his mom’s time passes, the percentage of ownership for those homes relative to his other 4 siblings also depends on what his mom’s trust says (as well as what sort of capital gains taxes that ends up getting passed, if any, since none of them will be owner occupied. Inheritance taxes will will most likely be $0 for them in this specific case)
Talking about what he can do if he owned those properties is a moot point because they aren’t his. They are his mom’s.
[quote]
My experience is if title is held in a trust, you first have to transfer the house to the individual, refinance, then quit claim to the trust.That’s because lien priority is first come first served as far as recording is concerned.[/quote]
Every time I refinanced my properties held in a trust, I never had a problem because the title of the property was held in a trust. The only thing some lenders have done was made me fill out paperwork that would take it out of the trust and then another paperwork that would put it right back in. But both deed paperwork would be completed and done at the same time. It didn’t hinder the loan application or closing the loan. Just extra paperwork that were filed while closing escrow. Putting property in a corp is a complete different beast.
February 2, 2015 at 4:33 AM #782526CoronitaParticipant[quote]
My mother would not be able to qualify. She is handicapped and has no job. She would, in theory, move in with us and we would use her properties to leverage as down payment for the house we would all live in…so I guess she would need to take out equity and give that money to me which I would then use as a down payment? I think there are severe tax penalties for doing this, which I of course would want to avoid.
But to simplify, I still am not sure of the basic principle of whether or not one should take out equity or simply sell the property for a down payment.
[/quote]It’s not tax penalty per-se. It’s just she needs to pay capital gains taxes on it, since none of them are her primary home. ( If any of them were, she wouldn’t have to pay any capital gains taxes on her primary up to $250k.) The good news is depending on her tax bracket it will be between 5-15%, most likely on the lower side. Her tax hit might actually not be that bad because, as you say, she has no income right now, and she has a medical disability. Have you tried figure out exactly how much taxes would be if she did sell? Easiest way to figure that out is get a copy of turbo tax and run through the numbers for her.
For any sort of cash-out refinance, you’ll be able to take out at most 85% LTV I believe anyway (So if your value is appraised at $120k, you can cash out a max of $102k I think).
Your capital gains taxes your mom will end up paying in the worst case scenaro 15% I think (it will be less most likely because of her tax bracket). So if she sells and pays taxes on a $120k sales price (assuming her cost basis is $0, her cost basis might be above $0, but let’s assume she’s had the property for a long time). She’ll get back $102k after paying taxes.
In terms of how much cash of her’s you can immediately use towards a down payment, it’s a wash.
I guess a bigger question is whether you want to deal with two rental properties in Riverside and Arizona, being that you will have so much on your plate already at home. Because eventually, you will be the one dealing with it (directly or indirectly).
Also, the question is, do you have any other siblings for which your mom might be wanting to at least partially willing/trusting part of her estate too? I mean, are you sure you are the 100% beneficiary of her estate? I ask because you’re considering taking on additional debt for long term. Can you count that 100% of her assets/income will go to you to help pay for that additional debt load?
February 2, 2015 at 10:36 AM #782537GuestPutting taxes issues aside, there’s technically nothing that prevents the trustee of the trust from transferring the property to the son. The son then gets a mortgage and can transfer the property back to the trust.
It’s not done at the same time, for lien priority purposes, the deed of trust has to be recorded before the transfer back to the trust. Within minutes perhaps, but there’s an order.
February 2, 2015 at 10:55 AM #782539Participant[quote=FlyerInHi]Putting taxes issues aside, there’s technically nothing that prevents the trustee of the trust from transferring the property to the son. The son then gets a mortgage and can transfer the property back to the trust.
It’s not done at the same time, for lien priority purposes, the deed of trust has to be recorded before the transfer back to the trust. Within minutes perhaps, but there’s an order.[/quote]
I’m just curious, are you a real estate attorney or licensed mortgage broker ?
February 2, 2015 at 11:15 AM #782541Participant[quote=TexasLine]Wow. I guess this is more complicated than I thought.
My mother would not be able to qualify. She is handicapped and has no job. She would, in theory, move in with us and we would use her properties to leverage as down payment for the house we would all live in…so I guess she would need to take out equity and give that money to me which I would then use as a down payment? I think there are severe tax penalties for doing this, which I of course would want to avoid.
But to simplify, I still am not sure of the basic principle of whether or not one should take out equity or simply sell the property for a down payment.
Do all brokers posses the knowledge to deal with this kind of issue?[/quote]
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What complicates it is getting advice from people who don’t know what they are talking about.severe tax penalties ?
Ask your tax advisor if there are penalties for refinancing and taking cash out.Does she report rental income on tax returns?
Does she have any SSI/Disabilty/Pension income ?
She may be able to qualify for more than you think. She doesn’t have to have a job.She just needs ‘qualifying’ income.Brokers should ‘possess’ the knowledge, but sadly they don’t..and there’s some really bad advice on this website from people based on their (limited)experience that can confuse you too.
Mom MAY be able to borrow up to 70% of the current value of the properties, I doubt any more than that, IF she can qualify.
February 2, 2015 at 11:18 AM #782542CoronitaParticipant[quote=FlyerInHi]Putting taxes issues aside, there’s technically nothing that prevents the trustee of the trust from transferring the property to the son. The son then gets a mortgage and can transfer the property back to the trust.
It’s not done at the same time, for lien priority purposes, the deed of trust has to be recorded before the transfer back to the trust. Within minutes perhaps, but there’s an order.[/quote]
Ugh….. Come on, let’s think about this… If it really was *that* easy, don’t you think people would readily do this to avoid any sort of inheritance taxes?
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