Posted on: 17th Dec, 2007 07:26 pm
my father owns a home with title free and clear. he wishes to sell it to my wife and me. we decided against a private intrafamily mortgage and are seeking outside financing.
we have the lowest risk rating (excellent credit-worthiness), so obtaining a loan is no problem. the price is singnificantly greater than conforming limits, so i am looking for the most advantagious structuring of the loan (lowest interest rate). i also would like to keep the mortgage loan local rather than to be sold to a servicing company (just a personal preference).
the local credit union offered a very good rate for the full loan amount, but the method of financing was unfamiliar to me. they said i needed to have our attorney get the title into our name, then the credit union could refinance.
our attorney seemed surprised, but in reading some of the forum here, it seems that this approach is not uncommon. it seems that my dad would simply deed the property to my wife and me and record the deed to transfer the title into our names. then, the credit union will refinance the property in the amount we need and we give the money to my dad.
1. is this correct?
2. if so, what type of deed should be used?
3. what "consideration" is noted on the deed, since the actual transfer of money to my dad is later than the date the deed is executed?
4. do we need a sales contract?
any other questions i should be asking?
thanks.
we have the lowest risk rating (excellent credit-worthiness), so obtaining a loan is no problem. the price is singnificantly greater than conforming limits, so i am looking for the most advantagious structuring of the loan (lowest interest rate). i also would like to keep the mortgage loan local rather than to be sold to a servicing company (just a personal preference).
the local credit union offered a very good rate for the full loan amount, but the method of financing was unfamiliar to me. they said i needed to have our attorney get the title into our name, then the credit union could refinance.
our attorney seemed surprised, but in reading some of the forum here, it seems that this approach is not uncommon. it seems that my dad would simply deed the property to my wife and me and record the deed to transfer the title into our names. then, the credit union will refinance the property in the amount we need and we give the money to my dad.
1. is this correct?
2. if so, what type of deed should be used?
3. what "consideration" is noted on the deed, since the actual transfer of money to my dad is later than the date the deed is executed?
4. do we need a sales contract?
any other questions i should be asking?
thanks.
Hi Doug,
What the credit union has said is correct. Until and unless you have the property-title in your name, you cannot refinance the loan in your name. However, if you have a good understanding with the lender, he can allow you to refinance and change the title to your name at the refinance only.
Your dad needs to sign on a grant deed (as the house is free of debts) and transfer the property to you. Then he needs to get the deed signed by a notary and then record it at the County Recorder's office.
The transfer of money to your dad will be done at the closing of the refinance as far as I understand as you will probably get the money from the credit union either at closing or 3-4 days after that. So, the money consideration as noted in deed over here will be either the sale price or else a small value for just executing the deed. You need to verify this with the attorney.
You will definitely need a sales contract as prepared by a real estate attorney. In fact, you should ask him whet other documents are required specifically for your buying transaction. It's better to have the entire transaction in a legal process as is done by any buyer and seller. Just because they're your parents, don't leave a gap as far as the documents and contracts are concerned.
Thanks
What the credit union has said is correct. Until and unless you have the property-title in your name, you cannot refinance the loan in your name. However, if you have a good understanding with the lender, he can allow you to refinance and change the title to your name at the refinance only.
Your dad needs to sign on a grant deed (as the house is free of debts) and transfer the property to you. Then he needs to get the deed signed by a notary and then record it at the County Recorder's office.
The transfer of money to your dad will be done at the closing of the refinance as far as I understand as you will probably get the money from the credit union either at closing or 3-4 days after that. So, the money consideration as noted in deed over here will be either the sale price or else a small value for just executing the deed. You need to verify this with the attorney.
You will definitely need a sales contract as prepared by a real estate attorney. In fact, you should ask him whet other documents are required specifically for your buying transaction. It's better to have the entire transaction in a legal process as is done by any buyer and seller. Just because they're your parents, don't leave a gap as far as the documents and contracts are concerned.
Thanks
i agree with the poster that the credit union is using an odd structure. this is truly a purchase transaction. in my opinion, you and your dad would want to enter into a purchase agreement, stipulating the terms under which you will purchase the home. this should be done no matter whether you follow the CU's methods or not.
if you decide to follow their methods, then helping is correct in indicating that title would need to be conveyed to you in order for them to refinance. this is risky business, i think, since they are advocating that your dad transfer ownership to you prior to receiving the sale proceeds.
should anything happen to any of you that would impact your ability to actually acquire the funds needed, prior to the refinance transaction being finalized, he could be left holding the bag.
i know, i know...family members never stiff each other. yeah, right.
you ought to consult with a good real estate lawyer to get the ground rules of this transaction right. that is your first and most important step.
if you decide to follow their methods, then helping is correct in indicating that title would need to be conveyed to you in order for them to refinance. this is risky business, i think, since they are advocating that your dad transfer ownership to you prior to receiving the sale proceeds.
should anything happen to any of you that would impact your ability to actually acquire the funds needed, prior to the refinance transaction being finalized, he could be left holding the bag.
i know, i know...family members never stiff each other. yeah, right.
you ought to consult with a good real estate lawyer to get the ground rules of this transaction right. that is your first and most important step.
You have an attorney. You should listen to him or her.
Hi,
I think if you want to refinance, the title should be on your name. So what the credit union has advised you is right.
"If so, what type of deed should be used?"- You can use a grant deed to transfer the title to your name. Your father needs to sign the deed in front of the notary public and you need to notarized the deed and record it in the County recorder office.
Surely you need a sale contract. Contact with a real estate attorney. He will help you in this regard.
Feel free if you have any further questions.
Best of luck,
Larry
I think if you want to refinance, the title should be on your name. So what the credit union has advised you is right.
"If so, what type of deed should be used?"- You can use a grant deed to transfer the title to your name. Your father needs to sign the deed in front of the notary public and you need to notarized the deed and record it in the County recorder office.
Surely you need a sale contract. Contact with a real estate attorney. He will help you in this regard.
Feel free if you have any further questions.
Best of luck,
Larry
The reason the credit union wants to transfer the property into your name first is to do a refinance instead of a purchase. This way you don't have to come up with a down payment. Another way to do this is a gift of equity and treat it as a purchase. Again, with this method, you may not have to bring a down payment depending on how much equity is in the property.
There should be no harm done in just transfering ownership and then refinancing through your credit union.
There should be no harm done in just transfering ownership and then refinancing through your credit union.