Paying cash, but needing a mortgage... (insurance, loan, California, mortgage rates)
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We found a great house that we want, but our house hasn't sold. Family memeber wants to give us a loan so that we can purchase the new house and repay them once our house sells. The purchase of the new house would be 100% cash. My question is this: Upon the sale of our current house, can we obtain a mortgage for a house that has been paid in full?
They would write me a check....I would write the sellers a check. Paid in full via cash (check). In order to pay back the money to the family, we'd need a mortgage right?
What state are you in? In Texas, if you did that, you could only get 80% of the home's value out of the house. You must keep 20% value in. The only way to finance more than that is upon the initial sale to you.
If your family member paid cash in their name, and then you bought it upon the sale of your home, then you could do whatever financing you qualified for.
1. Family writes me a check.
2. Deposit check into my account.
3. Write owner check from my acct to the owner.
4. Sell current house
5. Get mortgage on new house (that has been paid for in cash in my name) in order to pay back family in full.
When I briefly looked into doing something similar, I was told that the mortgage rates for the way you want to do it are generally not quite as good as they are when going the traditional way. Just one more thing to check on before leaping...
Have your family member buy the "new" house (the house you want to buy). When your "old" house sells buy the "new" house from your family member.
During the time between selling the "old" house and your purchase from the family member of the "new" house - you may pay the family member rent. ?? and/ or
When it's time for you to buy the "new" house from your family member, you may need to add on the cost of insurance, interest, ... whatever expenses there might have been. Be sure to have the terms very clear before you enter into any type of business deal with a family member.
In our area (CO) it would be possible for the family member to purchase the "new" house with an "open" title policy - I've also heard it called "a turn in policy". Check with your title company. Many investors use this type of title policy for a house they are going to flip. It's simply cheaper than buying title insurance twice.
In California anyway, if you don't do as it as described above, it will be considered a refinance. Sometimes the loan terms are different for refinance than they are for new purchase.
Nice tip on the title insurance
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