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Profile picture for esteckmeyer

Buying a Condo for my Mom

My husband and I are currently renting in the city and although we love our beautiful loft apartment, the rent is very high so saving a large sum for a house down payment is hard.  

I have the idea to purchase a small and relatively inexpensive condo in the suburb that I grew up in.  We can easily afford this and although it will be a sacrifice on space, in a year we will save enough to make it worth the effort.  Another angle to this plan is that when we're ready to buy our house, I want to "rent" the condo out to my mom.  She has had some financial issues in the past and has been renting for the last 18+ years so this would be a perfect way to get her into "her own" place and just have her cover the mortgage.  

Can anyone let me know their thoughts on this situation?  What kind of mortgage would be best?  Will this be too tricky when we go to buy our house?  Any feedback will be much appreciated!  
  • January 06 2014 - Pittsburgh
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Answers (3)

Profile picture for BlairCohen
It sounds like a great idea.  You are able to save money to buy the home you want while building equity in the condo which becomes an investment and  you help your mom. 

As for a mortgage it depends upon your financial qualifications.  The condo you are purchasing also must qualify as the regulations are different for condo's then no-condo's.  Lenders will want to know about the  condo association's rule and regulations, financial solvency of the association, the percentage of units in the association that are owner occupied versus rental units, the number of units that may be owned by one entity, etc ..  Some condo buildings are more difficult to finance then others.  you should contact a good lender and get pre-approved for a mortgage.  You should also contact a good real estate agent to represent you in finding, negotiating and purchasing a qualifying condo.

Please note that some condo complexes may limit the number of rentals or may not permit rentals at all which may make it easier to meet mortgage underwriting criteria but could be problematic should want to rent to your mother (or anybody else) when you buy your next home.


Good luck,
Blair
  • January 06 2014
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Main question is how severe were the financial issues she encountered and are they resolved?   If she has a reasonable credit score and no major derogatory credit events, then potentially you can qualify for owner occupied terms applying with her (lower down payment, better rate).

If her credit will not permit this, then your purchase with her name not on the loan would need to be done as investment, which will typically require minimum 20% down and also a full review of the condo project for warrantability (occupany rate, HOA delinquency and many other criteria to meet).

As for impact on your later purchase, certainly this will could an impact if you intend to purchase in next 12-24 months.   If bought as investment some lenders will allow lease agreement to offset the mortgage.

  • January 06 2014
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Profile picture for wetdawgs
Having no idea of your income, the concern I'd have about your plan is that you would have to qualify for two mortgages when you buy a house rather than just one.     In addition, many condos have very strict rules about the percentage of rentals allowed in the complex so you won't necessarily be able to rent.

Why not go about this a different direction - rent where it is less expensive while you save your down payment, buy a home and then (and only then) evaluate your finances (with a lender's help) to see if you can afford the down payment for your mother's place.

Is  your mother having problems being in a rental?


  • January 06 2014
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