Can I turn over my home to a family member?

[haapril]

I am trying to purchase a home, but since I 've been owning my current home with less then 20% equity. I do not qualify to purchase a second. I have the money, and the credit. LO said that I can not use my home as a rental property because I have less then 20% equity( Home brought in 05) and that is one of the requirement now to use current home as a rental income. I was thinking to turn it over to a family member, but is it easy to sign home over to a family member/friend???? My home has been on the market for 5 months and no major bites yet. I Looking to purchase a bigger home for by big family at a amazing deal. Does any one has any suggestion that will help me in my situation. Thank you all for your time and advice.

[Anonymous]

What you are proposing is called an assumption. The family member would "assume" the mortgage. Some mortgages don't allow assumptions. If they do, the family member has to qualify just like they would for any other mortgage. The upside of an assumption can be that the assumer can keep a good interest rate, however, I have a hard time believing that any mortgage settled previous to now would have a better interest rate than now. I just settled a week ago and I settled with 4.875 with no points.

[GregB]

Did you put enough down when you bought it in 2005 that you still have 20% equity in this market? Around here (CA), that would have required at least 50% down and quite a bit more than that if it was anything mid-priced and above.

We still have quite a way to go to get back to reality around here. I expect my house within one year to be back to what I paid for it in 1999.

[llecs]

Aside from assuming the mortgage, there are tax considerations to make. DW and I had a chance to consider to assume the mortgage of a home worth approx $300k in this market. The remaining mortgage was about half the value. We checked with a CPA and while we certainly could take over the mortgage, assuming the lender lets us. However, the house has to be appraised and a copy sent to the IRS. Each of us are allowed a $13k gift tax exclusion for 2009, but the donor (my in-laws) would have to pay a gift tax on the price of the appraised value, minus the loan balance, minus the 26k. Whatever is left over, in our in-law's example ($300k-$150k-$26k=$124k) is taxable.

[ShanetheMortgageMan]

Yup, just can turn it over, need to either sell it to your friend which they would qualify for a new mortgage or like the other posted pointed out they'd need to assume your existing mortgage terms.