Need Help- Buying first home with dad's help

[Joe Edwards-Hoff]

Hey all,

I guess this isn't my first home, but it is my first home that I am buying to personally live in with my wife. And according to a bank, I am a first time home buyer.

Anyway, here is the scoop. I have been wanting to find a small SFR for my wife and I to move into as a start home with the intention of moving out in a couple years and renting. A house popped up in my town for 65k. It was foreclosed on and is owned by Freddie Mac. The house would rent for about $800 +/- $100 in my college town. Not quite 2% rule, but if I move in it'll work nicely.

I don't have much for a down payment right now, though I could get 10% pretty easily. Either way, my dad offered to help me with the house if I needed it. I figure I want to go the best route possible, with or without his help. Though he doesn't have cash in the bank, he could get a home equity loan very easily with the setup he is in (I don't know too many details there, but he helped me consolidate a few credit cards after college). If he loaned me that money, I would have to pay it back at 4.5% interest with interest only minimum payments. Pretty sweet deal in my opinion. The only catch is that he'd rather not have the debt in his name for an extended period of time. Otherwise I'd just have him hold the note.

We have come up with two options and would like to hear your thoughts, or alternatives.

1) He loans me a little money for the down payment (I'd try to find a way to make it not look like it was just given to me, if need be for getting a loan. Like sell my 67 fastback mustang for 10k) And then my wife and I go get traditional financing.

2) He loans us the full amount plus a little bit for rehab work and then we refi after we get the house shaped up a little.

The house needs some work, mostly cosmetic. My dad and I figured $6500 would cover all of the materials. I am a shop teacher and will have a summer off to do repairs if need be.

Anyway, I'd love to hear your thoughts. We're renting right now and the payments on this house would be about the same as our rent, so it makes sense. And my wife wants a washer and dryer really bad... ;o)

[Mark Updegraff]

GI joe,

1. Don't worry about where the money came from. Worry about working with a Bank. If it is "gifted" there are limits, check with your banker. I think it may be like 6-10K. Anyway, if the amount "gifted" to you is not enough, you will have to "show" the difference. Meaning, the bank will look to see that you've had the funds in an account for some period of time (30-90 days, I forget).

2. If your father needs to re-fi to get equity out of his house he will have closing costs. You will then also have closing costs when you refi. It would be cheaper to just get this set up correct from the get go.

Comments:

your +/- 100$ in rent is HUGE. Try to get a better handle on this. Actually pretend to be in the rental market and go look at homes for rent in this area. Take notes on the condition. If you can talk to other renters in the area see what they are paying. Rent prices are cyclical. So there could easily be a +/- 100 spread during a typical year. Start figuring out what that is and how it relates to your timeline. In my college town, rents are higher in April, May, June, July, August, and September. Rents are lower otherwise.

As a "First Time Homebuyer" you eligible for "Sellers Concessions" which is where the seller gives you 3-6% back at closing to help offset costs.

How long has the property been on the Market? That will give you an idea of the strength needed in your offer, and the willingness of the bank to let it go.

How long have other properties in the neighborhood been on the market? That will give you an idea of the demand for housing in the neighborhood.

Have you checked the sold comps? How does this stack up?

If I can give one piece of advice on "fix er up ers" it is: It will take you longer than anticipated to complete, and it will cost you more than you think. In my optimistic world things seem to double from my initial estimates, but I am getting better (done about 15 now).

Always happy to help, let us know if you have any other questions.

Hopefully some vets will chime in as well.

Best Luck!
mark