Buying A Home
Barbara83
member
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Parents as loan co-signers?
I'e been with my FI for almost 9 years, we're looking to buy a house together before we get married. We rather spend money on a down payment than a wedding right now plus we have a baby on the way so we'd like to settle in somewhere. The problem is he has a poor credit score and the first loan we tried to get we didn't qualify for. I have excellent credit but my income isn't enough to get a loan on my own. He has a good income but poor credit. I am now considering getting a loan under just my name and having my parents co-sign. My parents have good credit and their house is paid off. However since my FI makes a lot more money than me (over double) he'll probably be paying most of the mortgage. What are the pros and cons of having the mortgage be under my parents and my name while my FI lives there and pays mortgage? Should we get a real estate attorney involved if we do this to state conditions that he's paying mortgage and what would happen if we split up? Since we're not married yet I'm worried one of us will get the short end of the stick with the house if we split up. I don't anticipate us splitting up, we've been together for so long and have a child together, but I want to make sure to cover all our bases since we are not married yet.
Re: Parents as loan co-signers?
I would not have parents as co-signers.
I would go to the Justice of the Peace and get married. (you will have more legal protections). A fancy wedding will not make you more "married" nor give you a happier marriage. I would skip it. Get legally married and move on.
Save for the next few years, get your FI's credit score up - (assuming he has changed his financial habits) then buy. Meanwhile rent .
This. Don't buy until you're married and can qualify for the loan by yourselves.
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Thinking of doing cosmetic updates to a dated home? These were our costs.
But to answer your actual question:
Pro: You'll be able to get the mortgage approved
Con: Your parents will be liable for the mortgage is you and FI stop paying. That would be a crappy way to repay their generosity.
Con: Your FI will not be legally tied to this house. If things in your relationship go south he has no incentive to help you keep making the payments. (even considering the child)
Con: I know from watching friends go through this that changing the mortgage and deed later on to put his name on instead of your parents is a real PITA.
Con: If your parents decide they want out of the deal they can potentially force the sale of the house since their name is on it.
I know in your head you are probably thinking "Well what are the odds of these things happening? We've been together forever and my parents wouldn't do that." And it could turn out just fine. My now-H and I bought a house together long before we were married and it was fine. (Although we didn't involve cosigners). But if it doesn't turn out fine it will turn out spectacularly not-fine.
If you wanted co-signers so you could qualify for a cheaper mortgage rate, I'd say fine go ahead but refinance as soon as possible.
In this instance, because you can't qualify for the mortgage on your own, it's a very risky propsition for your parents. Other than the fact that they love you & their new grandchild, I don't see a good reason for them to do this. (Love is not a good reason).
While it would be nice to be settled before the baby comes, that may not be an option. Can you find a house / condo in a price range you can afford without help? If so, buy that after you are married.
My first question is "what is the rush to buy a house?". If you are renting now, then while you rent save some money for a down payment, get married cheaply, and if you get any money for your wedding, use that for a down payment. Hopefully by then your boyfriend will have cleaned up his credit.
I have adult children, one of whom went $80K into debt with student loans to get the Master's Degree he wanted. I did not co-sign for that, nor would I co-sign for a mortgage if he wanted that either.
Why not look into renting with an option to buy? There may be some properties in your area where that is available due to massive foreclosures, and this may be common.
Being an adult means taking responsibilities for your finances and life choices. What if (God forbid) there is anything wrong with your baby? What if one of you loses your job, or health care? What if one of you gets really sick, or you have some high medical bills? Car trouble with expensive repair bills? These are all things that happen even to the luckiest among us. You are about to be a family, with more responsibilities. I think it's important to learn how to do it yourselves.
Good luck.
There are a few red flags here for me:
1- to have that low of a credit score, I assume that he either has a hefty amount of debt, or is having trouble paying on time.
2- with your low income not able to quality for a loan, it makes me wonder how expensive of a house you're looking at, or what you have saved for a down payment.
3- co-signing a loan for an unmarried couple brings up all sorts of legal red flags. this could turn ugly if something goes wrong. I would REALLY suggest against it. If anything happens, the legal action comes down on your parents as they would technically be part owners of the house. Would they really be ok with that?
** Make sure you can even afford what you're attempting to do. It is NOT SMART to stretch yourself beyond your means. For ANY reason. It never ends well, and will set you all up for failure, stressful relationships and hard living situations. **
-how much do you have saved for a down payment? What size/cost of house are you looking at? Can you afford all the monthly 'keep the house running' costs without going over 45% of your monthly income?
-do you have enough money put away in savings (not counting the down payment) to take care of your house costs, family, medical, extra costs for 6months-1year? this is your 'emergency fund' and is EXTREMELY important to have.
- do you have a plan and finances in place in case one of you (especially him) loses a job? baby (or one of you) gets sick and needs emergency care? house needs repair? car dies?
From what you've stated, it sounds like you both don't have the means to purchase a house right now. While sad, it's not a bad situation considering the alternative of purchasing a house, and then potentially losing it and having nothing. I would find a compromise right now with either renting, or perhaps living with family members for awhile until you can save more money for a wedding and a house.
for what its worth -- my now-husband and I both moved back to parents houses after graduating college and had a 2 year engagement. we saved money, and purchased a house right before the wedding. we made sure that ALL house costs could be covered by me, in case he lost his job (he was working for a small start-up.....so he did lose his job after a couple months). Because of our built-up savings and plan in the beginning -- we can continue living comfortably while hubby finds another job.
bottom line - don't dive into something that's going to get you in over your head. you'll be much happier to wait until you can do this more comfortably on your own.
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