My mother suffered a stroke in July of this year. Has own her current property for the last 8 years. My question is as follows:
Since she is not able to work now since the illness, I tried to refinace her current mortgage to cash out and buy ranch style home. Everything seem to be fine until they called me and said that her short term disability payments was not considered income. To my disappointment we could not refinance the property, while she has over $50,000 in equity, we could not complete the process.
Is it an option to have mom quit claim her deed over in my name and then I could refinance under my name, since I have the credit and the employment to complete the process.
By quit claiming the deed over, will this invoke the DOSC, due on sales clause?
What other issues could arise. I do not see her being able to return to work and to do a no doc loan the points and intrest is fairly high.
Sorry for being longwinded but I would like a response if possible soon.
Some would say a quit claim deed is insufficient to transfer title and that you should use a general warranty deed. This would typically trigger the due on sale clause of your mother’s mortgage note. But if you are refinancing anyway that does not really matter. Have you considered simply co-signing your mother’s refinance? This would put your income into the underwriting mix. The lender may require that you be added to the title to accomplish this.
You mentioned in your post that you were looking to cash out refi her house and buy a ranch style home. Does this mean you are wishing to buy a second house? If not and you are simply looking to downsize your mother’s home why not sell her house outright, to extract the equity and roll this into a new home?
If I am correct to do a reverse mortgage the home needs to be paid off plus you need to be over 55 or 65. Being on disability does not mean your over 55.
Also doing a QCD and then refi can be tough. You generally will need to wait about 6months to 1 yr to season the title with your name before the banks will want to do this> Also if you have different last names, it can casue problems as the IRS and banks may look at this as a way around the your mom not paying taxes on a sale or transfer of ownership.
Now why do you want to get the 50K out., Is it for investment properties?? Have you looked into getting a HELOC???
The home does not need to be paid off to get a reverse mortgage. The reverse mortgage can pay off the existing mortgage, and provide cash flow if the home has a sufficient amount of equity.
If the current owner has lived in the home for 2 years out of the last 5 years, there is no tax due on the sales proceeds, or profit if you will.
The other thing you could do if your income and credit would allow is to purchase the home from your mother with a Non Owner Occupied mortgage. There are several places that offer these mortgages, some will go to 100% Loan To Value if your credit score is high enough. Many will do 95% Loan To Value.
You could then lease the property to your mother and count the rent as income to offset the hit that your Debt To Income ratio is going to take with the new mortgage showing up on your credit report. Just remember that most lenders will only allow give you credit for 75 percent of the gross rent when reviewing your Debt To Income in any future loan applications.
If I can be of further assistance, please let me know.
When you say you are trying to cash out and buy a ranch style home, not sure what you mean? Are you refinancing to buy another home? If not, are you refinancing to keep this home? Either way, if you are refinancing to keep this home and asking why she can’t deed it to you and you refinance, why not buy the home outright in your name. Your interest rate will probably be lower, becuz when you refi and pull cash out you usually get a higher int. rate than if you refi for rate and term only. If I got this wrong, please post more details and maybe we would be able to help.
