Cosigners on the Loan + Holding Title + Tax Implications

[George Baltakian]

Hello and thanks for reading :)

I'm currently working on an investment out of state and been in communication with many lenders to find out about all my available options. 

Although I have good credit, cash reserves and expected cashflow, my income itself the last 2 years has been spotty, so I'm not an ideal candidate for conforming/conventional loans. And so far the interest rate on any portfolio loans I have come across are a bit too high for my targets.

At the moment, the best strategy seems to be: having my parents cosign for the loan and go conventional for the low interest rate. 

BUT I'd like to hold title alone, if possible. Some lenders tell me that my cosigner(s) would have to be on title, and taking them off title via quitclaim down the road would probably call the loan due. 

So here are my questions:

- If they cosign, would they have to be on title? Is there a way around this? Could I quitclaim later without having the loan called due? 

- If they are on title, would the income/expenses/tax deductions/write offs have to be included in their tax returns as well? I assume since i am financing and handling everything, I can just claim everything on my own and leave them out of it. Is that correct?- 

Any other considerations here?

Thanks in advance! 

[George Baltakian]

Thanks for your reply @Tigran Kalaydzhyan . Here's a quick update on my situation in case you're interested. 

After talking to various lenders I decided the best move is to go conventional/conforming loan. Every conventional lender I've spoken to said they require the cosigner to be on title since they have the stronger income. 

FYI it's my investment and I will be paying for downpayment + all expenses + receiving all the income. I just need the cosigner to qualify for the low interest rate loan I want. Ideally the cosigner would not have to report anything on their own tax return. 

However, after a brief chat with a lawyer I learned that since the cosigner will be on title, certain deductions (like depreciation) would usually be based on their share of ownership. For example, if we're tenants in common and the cosigner owns 50% of the property, we would each claim 50% on our individual tax returns. 

BUT I CAN create a Tenants in Common Agreement (lawyer sent me a template if anyone needs) which clearly outlines the ownership shares, who receives the income, and who pays each expense. 

To claim the full mortgage interest tax deductions, I need to make sure the lender will send the Form 1098 to myself/my name and NOT in the name of the cosigner.  

Will probably just create a TIC agreement and claim everything 100%, then quitclaim the cosigner off title after the first few months. Hopefully, without the loan being called due.

Will update soon .