| Going back to school....And buying a house. |
|
|
|
|
|
NateJonas
First Time Poster
Cash: $ 0.00
Posts: 1
Joined: 14 Jun 2004
|
| Going back to school....And buying a house. |
 |
|
I am going back to school and will be there for more than three years. I plan to buy a house that I am more than qualified for with my current credit and salary. I have assets, (401k, stock, and Savings), roughly equivalent to the purchase price of the new house.
Problem: I do not qualify for financing because I will have no income once I start school.
Potential solution: I have a source, (my mother), that is willing to take out a mortgage in her name and allow me to pay her rent. For her, the house would either be an investment property or second home.
Is there an advantage of one over the other? Is there any other solution to the dilema?
PS: Yes, parents are wonderful.
|
Mon Jun 14, 2004 8:50 pm |
|
|
Andrew
Admin
Cash: $ 467.10
Posts: 1717
Joined: 02 Nov 2003
Location: Texas
|
|
|
|
Indeed parents are wonderful resources in such situations!
You mention that you are qualified given your current income and credit. Seems to me that your future plans are your business, and that a potential mortgage company would not need to know that you planned to go back to school. Once you have your mortgage, they aren't going to take it back just because you go to school, but you will, of course, still be responsible for the note in this case. You mentioned having assets equivalent to the price of the house, so, if you are willing, you could tap your resources in order to continue to pay your note for 3 years. This shouldn't be too bad of a burden on your assests since your savings, etc. are so large. When you are done with school, you should be able to take on the note with ease with your new and hopefully larger income. It also seems that you could get several good tax returns, given that you would be paying deductable mortgage interest, especially on the front end of the mortgage, while your earnings were very low.
On the other hand, if your mom purchased the home, there would be more tax burden overall, because she would only be able to claim a homestead exemption on her existing home and not the investment property, thus paying full taxes.
There may be other issues that I'm missing, so you might want to talk to a financial professional. But if I were you, and in your outstanding position, I would lean towards purchasing the house myself.
|
|
Wed Jun 16, 2004 2:43 pm |
|
|
REI Houston
Moderator
Cash: $ 5.60
Posts: 23
Joined: 16 Mar 2004
Location: Houston, TX
|
Your mom can also take paper losses on the rental house in the form of depreciation to help off set the tax burden. It is recommended by some that the house be owned by an LLC and not in her name for liability purposes. Check with a competent real estate attorney in the city the house will be in, there are local laws an attorney in another city may not be aware of. Make sure the house is purchased well below market for where it is. Check the appreciation rate. A good (!) real estate agent should know this.
If you are buying, look at HUD/Fannie Mae/Bank owned foreclosures. The have good buys in general, but make sure there is an inspection AND appraisal. These are two different things. Don't be afraid of odd smells from pets or disuse (especially if they have been vacant for several months). A few hundred dollars on a cleaning crew or new paint and carpet goes a LONG ways toward improving things.
Hope this helps!
Jerel
|
|
Fri Jul 02, 2004 1:28 am |
|
|
|
