Gift Of Equity Situation
I have a situation in which I'm having a property transferred into my name by an elderly relative. The FMV of the property is approx. $260,000.00. There is an outstanding credit line balance of $80,000.00 that has to be paid at closing and then the equity remaining in the property will be gifted at the same time. My problem is the best way to finance the $80,000.00. My credit is not that great (score of 560) and I have no other collateral. Will lenders take into consideration the large amount of equity that will immediatly become available? Or is there possibly another way I have'nt considered? Any help would be appreciated.
Simply get a purchase agreement signed by both you and the seller showing the purchase price of $80,000. Go to any local bank that writes loans and explain to them you want a loan at 40% LTV. I'm sure they would jump at it if you can play your cards right.
Why pay off the 80K. Why not just take it "subject to"???
With regard to Hibby, I'm not sure what "subject to" means.
Froggy, The property is being transferred under a NJ care giver statute. I'm not sure if I can purchase it in that way but I'll check that out. Thank you both.
PS If you could clarify Hibby It would be appreciated.
SUB2 is a technique in which basically you purchase the property subject to an exisiting loan on the property (just like you buy subject to an easment or such). The loan stays in the sellers name and they still have responsibility for it.
However, since you buy the property (you get the deed now) and obviously don't want it to be foreclosed on, you start making the payments to the mortgage holder.
Worst case senario is that the mortgage holder will tell you that you need to pay off the loan. By that time you will have a property with TONS of equity in it and should have no problem refinancing.
GOOD LUCK.
PS--I am not familiar with the NJ statute. I am just thinking that she wants to sell you a property for nothing but the money to pay off her loan. If you don't do SUB2, than you can simply just buy the property for that loan price.
In NJ you can do a gift of equity in your situation as a refinance. You will be able to get a mortgage with 560 with no problem if you live in the property as your own and do a full doc loan
Lori
[addsig]
I'm a mortgage broker, and personally, I don't think you would have ANY problem getting a loan with 40% LTV with that score. However, is 560 the middle of the three scores (experian, trans union, and equifax)? because that is what a sub-prime lender will want. Also, make sure your debt to income ratio is 45% or less, which is probably the max a lender will do.
Hope this helps.