Need to help my mom buy a double real fast!

Here’s my situation. I’m tired of my mom throwing away here money to pay rent for an apartment that’s she’s just not happy with. So here’s what I was thinking:

Her lease is up at the end of September, and I was thinking to buy a double and have the tenant help pay for the mortgage. Not rocket science, I know. But the plot thinkens:

I don’t believe her credit and cash reserves (none) are good enough to take care of the deal on her own. Divorce from my father caused some problems with their credit. So, that leaves me to be the one who has to step in. No problem, I have no reservations helping my mom…I definitely owe her for having to put up with me all those years! :smile Since I’m currently a homeowner myself (I pay the mortgage but my long-time GF is on the deed with me). She help pay her share of the mortgage but since I was the one with the 760 score I got a better rate by myself than if she was on the note with me.

Here’s the meat of the problem that I need guidance on. If I buy this house for my mom they’re (the lender) is going to view it as an investment and therefore ask for 15-20% down plus closing costs, etc…right?

Like I said, I have no problem helping mom out, but I really don’t want to have to come up with all that cash. My liqiud cash is earmarked for other things (paying off big chunks of CC debt, finish work on my 3rd floor of my house and stuff like that).

Now I understand that I can buy the house for my mom and state that I will be occupying the house and say that I’ve decided to move out of my current home and leave it to my GF (who can handle the mtg. on her own BTW) and get in on the double home for my mom without it being viewed as an investment property but how do I get in with minimal or no money down? My mom’s income doesn’t vary and is basically fixed so she doesn’t have any cash to put towards the purchase.

Any ideas as to what route i should take?
Patrick

Patrick,

My honest opinion is that this is a recipe for disaster. There is a HUGE difference between being a renter on a fixed income and owning a rental property. There are significant expenses associated with operating rentals and living next to a tenant could be EXTREMELY STRESSFUL.

Also, getting a mortgage under false impressions is mortgage fraud. I wouldn’t do that either.

JUST SAY NO!

Mike

You could co-sign for her as a non-occupant co-borrower.

Chris, FWIR in my conversation on Friday with my current lender for my home, if I sign as a co-borrower, non-occ. my mom would need to essentially qualify on her own. This confused me, but I was told this by two different CSR’s. Is this something that you’ve heard of before because it made no sense to me. If I co borrow as a non occupant then why in the hell would she need to basically qualify for the note on her own?

Pat

Hey Mike, thanks for your $.02, but I’m really confused by the first portion of your statement. The mortgage would be around $1k month including taxes, water and insurance. The 2nd unit can get $750-$800. Whats left (~$200) is FAR less than what she throws away every month in her apartment complex. I can build some equity in this property and my mom gets to live in a nicer place for $200 month plus utilities! I love the idea…where are you held up? Or what am I missing aside from potential tenant issues. Believe me I’d be quite selective about who lives next to my Mother…

So would you kindly help me understand what you are trying to advise me. Thanks in advance for your time.

If you co-sign for your mother as a non-occupant co-borrower she would need to still be able to qualify. Meaning she has to have the minimum credit score, etc… but you would be able to help with the income part, and reserves as well. Some lenders and programs do not allow non-occupant co-borrowers so your lender may just need to do a bit more research. Has your mother spoken to a lender yet? Using the income from the rental to help her qualify may help her get approved on her own. Then you could just step in and help if needed.