Co-Sign and then assume? Any insight welcome!

[Geni P.]

I would like to have my sister and brother-in-law purchase a house as their primary residence then appropriate the property for myself in the future. I will be funding the 10% downpayment and any repairs needed since it will more than likely be a damaged forclosure. When the purchase is all said and done how would I go about getting the house placed in my name a year or so down the line? Is it a possibility if I co-sign for my sister and husband to acquire the loan on their line of credit?

[Jon Holdman]

There are two separate, but related issues involved. One is title to the house. Another is the loan on the house.

Transferring title from your in-laws to you is simply a matter of them giving you a deed. You can do that at a kitchen table by filling out the property form (typically a "warranty deed"), everyone signing it with a notary and recording it. Better to do it at a title company with title insurance. Depending on your state and local laws, there may be transfer taxes.

As far as getting their names off the loan, the ONLY way to do that is to pay the loan off. If you want to take ownership of the house and have financing on it, you will need to get a new loan. Most of the proceeds of that loan will go to pay of the one in their name.

A creative real estate investing technique is to buy a house "subject to" the existing loan. In this case, your in-laws would give you the deed, and you would start making payments on the loan. The loan would remain in their name. Personally, I'd never sell a house in this manner, since I'd be giving up control of the asset but still have responsibility for the loan. If you don't pay, you'll damage their credit. Further, since they still have the existing loan, their ability to get another loan will be reduced.

Something you might do is to buy the house with them. Put all three of you on title and on the loan. After a year, you refinance the property with only your name on the new loan. Then, the three of you give a deed to just you. That is, the deed would list all three of you as the grantor (giver of the deed) and just you and the grantee (receiver of the deed.)

But I have to ask, why this complex arrangement. If you want to buy a house, just buy it. Why would your sister and brother just live there for a year, then move out? Why involve them or their credit? If they need a place to live for just a year, just rent. That will avoid the costs (which are significant) and complexity of buying.