December 15th, 2009
My mother is close to foreclosure and wants to quick deed her home to me & have me refinance for $100,000.00?
Her house is in Reseda, CA valued at $300,000.00. She says she will give me $20,000 “free”cash(out of the $100,000 refinance) so I can buy my own home. She plans to stay in her house(reseda,CA). Can she quick deed it to me as a vacation or rental property, this way I can still qualify for a 1st time homebuyers program? Do I still qualify?
She says she will pay the $100,000 loan but since her credit is horrible from a divorce she needs me to refinance with my credit only. She is 52. I’m not wishing my mom bad, but what is the reality she will pay live another 30 years to pay the $100,000 loan. She says she will pay till she passes away and then I can sell her house (since it will in my name). My mother hasn’t made the best financial decisions in the past, so i am VERY reluctant (this sounds like a hair brain scheme).
She says if she loses her home it’s my fault for not helping her! I am so stressed out.
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Filed under: Buy Property
I do not believe legally, that this can be done.
Don’t be bullied by your mother. Tell her it is illegal and that both of you could go to prison or face some hefty fraud charges since this is not considered an *arms length* transaction.
The bank will catch on to what she is trying to do, and block it.
It would not do any good to quit claim it to you, since her lender could still foreclose on it if payments to them are not up to date. You would effectively need to buy it and finance it yourself. If the sale is less than current fair market value, then your mom would need to file a gift tax form, but no federal tax is due until she uses up unified lifetime credit ($1 million).
It is hard to tell life expectancy without knowing family history, but the owner of our company (in Newport Beach) lived to 94 (his brother in MN lived to 96) and a friends mom in San Diego lived to age 97. My mom in WI is 79 in excellent health.
See IRS Form 5405 about qualifications for first home buyer credit. You mom’s home would not qualify, but as long as you do not live there, if you still qualify for a home loan, you could still qualify for the credit if you buy your own home.
It would be highly unlikely that you would qualify for the home buyers program.
Your question isn’t very clear. I don’t understand what she is refinancing for only $100,000. Is the house free and clear now? Or does she expect you to refinance the amount already financed on the house plus and additional $100,000?
If that is the case, there may be problems even refinancing to that amount since housing prices have dropped and most mortgage companies currently refinance to 80% of the newly appraised value for people with stellar credit. If you did that, you will then be on the hook for the full amount.
Also if you refinance her house under your name, you will have a problem purchasing your own home in the future since you will already have those loan payments charged against your income reducing the maximum loan available to you.
If you change the home to a rental, the maximum loan amount will then be reduced to a maximum of 70% of the appraised value, the interest rate will be increased, and property tax also increases.
Also a quit claim deed can have tax implications if the quit claim is not done for a spouse (usually during a divorce).
Sorry but it’s never going to work. Lenders call this a foreclosure bailout. Anytime a lender sees a non-arms length transaction the first thing they will do is look at the current mortgage history to determine if it is a foreclosure bail out. When the lender figures it out they will decline the loan.