topic Re: Purchasing House from Father in Mortgage Loans

Purchasing House from Father

Anonymous — Thu, 13 Mar 2014 19:50:38 GMT

Last year my husband and I tried to get a mortgage and all was good except his time on the job. He has been a truck driver since 2001; but in 2009 he was laid off when his company went bankrupt and he went back to school. in May 2012 he went back into trucking. Because he didn't have 2 years in the industry they denied the mortgage.
So this May he will have 2 years in the industry and with the same company.

I have an identity theft issue (Experian merged my credit file with someone with the same maiden name, my credit hasn't been the same since...even though they supposedly unmerged us) so I will not be on the mortgage. I am not currently working either so my income or lack there of isn't a factor either.

The house we want to purchase is a townhouse. I believe the purchase price is $115k; but my father in law only owes right at $90k so he is "gifting" us the equity.

As far as credit goes, about 2 years ago we went shopping for a new car. We went to 3 dealerships and between the 3, his credit was run over 30 times. All of those inquiries fall off this summer...but 30 inquiries on each credit agency seems to look bad.

My husband has a reposession over 7 years old. It falls off this summer.

He has an unsecured loan that was opened last April. The balance that shows up on the credit report is $8,700 but the payoff is $5,000.

He has a car loan that is almost 2 years old, payment of $359

He has a student loan totalling $19k i believe, payment is $28 monthly

He has 1 Best Buy Mastercard credit limit of $300; and his balance is $75 (opened Dec 2012)

He has 1 CapitalOne Mastercard credit limit $750; balance of $300 (opened April 2013)

He has 1 Bank of America Visa card credit limit of $500; balance of $100 (opened May 2013)

He has a Verizon collection that we are in the process of disputing. We returned 2 cable cards and a cable box, and they credited the account for 1 card, but are charging for the other box and card plus monthly fees of renting them. We talk to the company, they pull the tracking number, show that it was received and say they are putting in to have it "returned" and credited, but then it never does get done. So we're working with someone to get it credited and removed from the credit entirely.

We'd like to get the house in June so we can move and be established before the boys start school (different school district). But, would we be better off waiting until July or August when the reposession falls off as well as the inquiries? Would that extra month or so make that big of a difference on the credit score?

In the meantime I'm paying off the 3 credit cards we currently have so the balance will be under 5%.

Re: Purchasing House from Father

ShanetheMortgageMan — Thu, 13 Mar 2014 23:00:33 GMT

Is the repo still showing a balance or is it a $0 balance? If it's a $0 balance then it shouldn't be an issue since it's so old. But if it has a balance then while it'd be a small chance, there is still a chance that an underwriter could require it to be paid off. If it's the difference between waiting another 30 days then I wouldn't worry about it. You may even be able to contact the credit agencies and see if they'd remove it sooner than the 7 year mark, they've been known to do so when something is only a month or two away.

That is a lot of inquiries, but being that they are so old they shouldn't be an issue. Inquiries just need to be explained, but on mortgage credit credit reports we usually only see inquiries from 4-12 months ago (depending on the credit vendor) so they wouldn't even be asked about by underwriting. I've read that inquiries within 24 months can still impact the score though, so your call if you want to wait until they are over 24 months old when you have your credit checked or not.

Nice of your FIL to give you the gift of equity. Realize that in addition to his mortgage payoff there is usually $1-2k in closing costs, so you may need to get a loan amount of $92k in order for him not to bring in any money at closing (if that is what he wants to avoid). $92k would be 80% of $115k, so you'd still have the 20% down in order to avoid PMI.

There is probably a good chance his employment could work out now. He has a 2-year employment history, it's just not consecutive. Worst case is an underwriter would just want documentation of his prior employment, which you could prove by providing W-2's (another way is to have the old companies HR department verify his employment history, but since the company went bankruptcy I doubt that'd be possible at this point).

You didn't mention his income nor what the payment was on the unsecured loan, without that we couldn't tell if his income qualifies or not. Also didn't mention what his credit scores are.

Re: Purchasing House from Father

Anonymous — Thu, 13 Mar 2014 23:49:53 GMT

Thank you ! I will try to respond in order :-)

The repo shows up 3 different ways; 1 report it has been deleted, another report it shows a $0 balance and the last one shows a balance of $6500 even though it should be $0. It is scheduled to be deleted in June on 1 and July on the other. I didn't know that they may delete it early, I will definately look into it.

In reading other posts, I saw some people say that inquiries on the same day or in the same time frame were counted as one, or not looked at as closely; I'm not sure if this is true or not, but since they fall off shortly, I'm not going to worry about them.

The house is owned by both my mother in law and father in law. They are now divorced and want it gone; and since we like the house and need to move out of our area, they will just let us assume the loan (if it's assumable) or get a mortgage for the balance so they break even. They said they will both bring money to the table for closing, in addition to the money we will bring. But it is nice to know that we might be able to take out a little bit bigger of a mortgage to cover it if something doesn't work out.

The employment is our biggest hurdle. My husband was a truck driver in 2009 before the company went under. He went to school and then for about a year 2011-2012 he worked at a dealership as a service writer. In May 2012 he went back to driving. Because driver's (as well as service writers) aren't paid hourly or salary they need his w2s to show what he was making. I believe 2013 he made $50,500. Since the begining of 2014 he has taken a pay increase due to a change in shift; he is now making $1300-$1500 weekly Net.

His credit score is something of a mystery to me. I think it is low because at the begining of the year the credit cards were at the limit; I paid them all down last month, but haven't had the score re-checked since then.

EQ 548 EX 548 and TU 599. I know that he has to be at least 640. We're hoping in the next month or so to pay off all the credit cards completely.

Re: Purchasing House from Father

Anonymous — Thu, 13 Mar 2014 23:53:57 GMT

Sorry, loan payment is $179 a month

Re: Purchasing House from Father

ShanetheMortgageMan — Fri, 14 Mar 2014 00:10:15 GMT

Income looks fine for the amount of payments he has + the new mortgage payment. Since you'd have 20% down I'd recommend you go for conventional, which only requires a 620 score but the interest rates get much better as you get a higher score.

If EQ 548 EX 548 and TU 599 are his scores then paying off the credit cards will help, but won't do the trick entirely in my opinion. But hopefully with paying off the cards + Verizon deleting + the repo deleting he'll make it. Could be close though.

Re: Purchasing House from Father

Anonymous — Fri, 14 Mar 2014 00:14:40 GMT

It's all a lot of new credit. We've always done cash; so when we started looking into purchasing a house, our credit guy said that we needed credit. Then it was hard to get credit lol.

He was thinking about closing one of the credit cards; they all have annual fees and since everything is always cash it seems silly to keep them all open. Should we wait until after a mortgage to close any of them? Ideally I'd like to close them all but I know he needs them.

Re: Purchasing House from Father

StartingOver10 — Fri, 14 Mar 2014 01:49:46 GMT

Don't close any cc's until you close on the mortgage.