Posted by Hank (MD) on January 21, 2004 at 24:17:09:
Thanks, Bill. I agree with everything you said.
You mentioned the option of my parents adding me to the title instead of transferring it to me. Of course that would be fine, but how does that change the situation? Does it lower the risk to my parents? Would they only be 50% responsible for the loan instead of 100%?
Getting a loan then gifting the title? - Posted by Hank (MD)
Posted by Hank (MD) on January 20, 2004 at 22:52:00:
I am having difficulty getting a loan for a rental property.
A mortgage broker recently suggested that my parents get the loan in their name then “gift” the title to me.
Is this possible? Does anyone know how it works? For example, who would be responsible for the loan – the person who received the loan or the person who the title was gifted to?
Any help is greatly appreciated. (I did an archive search but came up with bupkiss.)
Well - Posted by E.Eka
Posted by E.Eka on January 21, 2004 at 14:59:53:
Notice you said “gifting the title”. That’s all that gets gifted. It’s like a Sub-to deal with your parents, only they are on the hook in case you default on the loan.
Re: Getting a loan then gifting the title? - Posted by Bill
Posted by Bill on January 20, 2004 at 23:44:09:
“Gifting” the title? All this guy is trying to do is to get your parents to qualify for the loan. Then he wants them to deed the property from them, to you.
Who will be responsible for the mortgage payments? Well, morally, YOU will be responsible. But legally, they are responsible since they are the ones who qualified for the loan, and their names remain on the loan documents.
Is this legal? Absolutely. Can the mortgage holder call the loan due and payable if they find out the title has been transferred to you (DOS clause)? NO, they can’t. There is a provision in the GARN act that allows the tranfer of title from parents to children. Perfectly fine.
But, why would your parents do this? They are legally resposible for the loan payments, and it’s their credit that could be damaged by non-payment, or late payments. And, why would you ask them to transfer title to you, knowing this? Maybe they could add you to title, making it a joint ownership. That’s more reasonable, anyway.
If your parents are willing to do this, take care and make sure you don’t mess up their credit by paying late or defaulting. Be truthful with them, and realistic about your experience. Having said all this, there are many investors that got their start this way, by using their parents credit.