Take out a home loan for my parents?

I would say no. We're on the verge of a another 2008 syle melt down from middle class people continually trying to live the highlife and support their spending habits with more loans.

No. No more loans. Be sensible. If you really want to help your parents buy a very cheap rural home and fix it up for them. But people need to stop takin out loans. The economy is not going to get any better.

Taking out a loan for someone else is a horrible idea.

I am confused. Are you planning to buy a house and rent it to them? Are you going to buy a home and just trust them to pay the mortgage?

In either case, what are you going to do if they don't pay. Are you willing and able to let them live rent free? Are you willing to kick out your parents?

They are going to pay the whole mortgage. I know it seems easy to say, but they will never not be able to pay. The mortgage is less than their rent that they've been paying for 8 years. I'm just curious if there are cons to this that I'm not thinking about.

You're a good son.

YoungGuy1 wrote:

I'm just curious if there are cons to this that I'm not thinking about.

Like the possibility of getting stuck paying the mortgage for someone else's home?

Agree. That is something I need to consider, but these are my parents. Also, this house would be mine. I'll be renting it to them and building equity. It's my money in the end.

yes, it is a no brainer to buy the house, let them pay the mortgage (assuming they can't get a lone themselves), and make no profit off this transaction whatsover.

YoungGuy1 wrote:

Agree. That is something I need to consider, but these are my parents. Also, this house would be mine. I'll be renting it to them and building equity. It's my money in the end.

It may be your money, but it won't be your house. I would generally say yes if it was just you, but this isn't for you its for someone else.

A bank is going to take one look at you if you need to take out a loan in 5 years and ask what about your other loan?

Besides the whole reason our economy is in the mess its in is from reasons exactly like this one, too many loans being taken out.

Also I don't know if what you're doing is illegal or not. You should probably talk to a lawyer too.

You better work something out with your parents. Also what are their sources of income, do they both work, are they going to be putting something sizeable down? Lot of questions here OP.

BTW if I was a loan officer these are the kinds of things that would p*ss me off. Banks are going under OP, for exactly the same reasons. What if you lose your job and enire source of income? What if your parents also lose their jobs and entire sources of income? What then?

And no, its not your money its the banks money.

You are acting almost like a bank in this transaction, lending from another bank to your parents. Youre basically shouldering the difference in credit risk between yourself and your parents with a net cost to your credit profile.

I also hate to do this...but what if your parents die in a year? How are their insurance policies set up? Are you a beneficiary? Are their wills updated?

You need to think about these things and it really doesn't sound like you have.

Don't know if anybody has ever done this in the history of the world, but if things don't work out, you can always sell the house. It's not like you have to own it for the rest of eternity.

Well intentioned, but bad idea.

1. Were you already planning on buying a house and renting it out to others?

2. If your parents don't pay the rent, will you evict them?

If the answer to either question is no, you should not do this.

But there is a fundamental disconnect here. You say your parents want to buy a house but they aren't doing that under your plan. How does this even help your parents?

A few other serious issues:

When taking out a mortgage, banks now are strict about you certifying that you live in the house (owner occupied). You would be nuts lie about that. Because you will not be able to certify that, you will be in the category of investment property mortgage. One can still get an investment mortgage, but (a) it is not as easy to qualify, and (b) the mortgage rate for an investment property is higher.

Have you thought about property taxes? Who is paying those? Also, you won't get a homeowner's exemption on your property taxes.

Same question for homeowner's insurance.

Also, do you own your house free and clear? If not (e.g. if you rent or have your own mortgage), taking out this mortgage for an investment property could make it much, much more complicated to ever qualify or requalify for a mortgage for your own home.

Have your dad join the US Navy SEALS Team and kill White Muslims using Lockheed drones and Northrop stealth helo ships.

another bit of advice wrote:

Well intentioned, but bad idea.

1. Were you already planning on buying a house and renting it out to others?

2. If your parents don't pay the rent, will you evict them?

If the answer to either question is no, you should not do this.

But there is a fundamental disconnect here. You say your parents want to buy a house but they aren't doing that under your plan. How does this even help your parents?

Agree with the above. It sounds like you mean well and are trying to help your parents, but your idea is chock full of risks.

Any time you deal with money issues and family, it has the potential to get ugly. Trust me; I've been there.

In general I think this could be a good idea.

There are a couple ways to do this.

You could co-own this with your parents and have all of you on the mortgage and on the deed.

Basically, you would be using your credit to get the loan as a co-signer.

You would have to draw up a contract determining how to share gained equity over time.

You could split the proceeds of the eventual sale of the home. You need to figure out how to use the tax deductins, etc.

Co-signing is a way to actually help your parents get a house rather then renting.

But there are may complications and there could be issues down the road.

The other way, as you said, would to be buy the home in your name and rent it to them.

If you feel they will make the payments then you would be OK. They've been making their payments already anyway.

You would have to set up the loan as an investment property which is a more difficult loan to get.

But if you can it could work out well for you.

It doesn't do much for them equity wise but it would be an upgrade from where they were living and they would be working with you if they wanted to do any updates on the house.

In time, you can build some equity and payment history on the investment property.

With that, you will be able to buy your own home when you are ready. You can have mortgages on two houses if you show that you can pay for them both.

Then you would have two sources of equity building.

At some point, your parents would move out or move on and you could sell it for a profit.

Right now, someone owns the place where your parents are living and they are building equity on that property.

Maybe you could be the one building that equity instead.

Suburban house cat wrote:

Any time you deal with money issues and family, it has the potential to get ugly.

Though everything I said was encouraging about getting a house for your parents, this statement about money and family is something to strongly consider.

X-Runner wrote:

Suburban house cat wrote:

Any time you deal with money issues and family, it has the potential to get ugly.

Though everything I said was encouraging about getting a house for your parents, this statement about money and family is something to strongly consider.

Yep. What is your plan the first time mom and dad are late on rent? The second time? The third time? What if it turns into EVERY time?

Maybe that'll never happen for you, but if it does, dealing with it will be a constant source of contention for all of you. It can make Thanksgiving/Christmas gatherings VERY uncomfortable.

Suburban house cat wrote:

Any time you deal with money issues and family, it has the potential to get ugly. Trust me; I've been there.

Let me second this. Ever made a loan to a friend and had them dissappear? Suddenly, they don't return your calls or texts, and you can never quite locate them? I have.

Now have that happen with mom and dad, and well, talk about an uncomfortable situation.