Profile picture for Peter Donovan

Buying house from a family member?

The house where we live in, is under my wife's name at a APR of 6.something% (FHA) - both on the loan and on the title
Since interest rates are low (but slowly creeping up), we are in the market to get something better. Our first option was to refi with our current lender (Bank of America).

The thing that kind of bothers or concerns me is when they started our process for re-fi, they are not taking into account the remaining balance on the loan but the original amount. Not only that the interest they quoted really doesnt take into account my credit score (which is in the top bracket) but instead they take some average score and base the numbers on that. I don't think that is really a fair deal.

I really am not comfortable following through the process with BofA.

So I am thinking, why cant I just buy the house from my wife using a different lender. Process it as a brand new loan and start fresh based on my credit score. Will I get benefits as a first time home buyer (since I have never owned a house before)

Is that the right approach?
Suggestions, thoughts, comments welcome.
  • July 30 2013 - McDonough
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Answers (5)

Profile picture for Outer Banks N C
First time home buyer only means that you have not been on a loan in the past few years, it does not mean you can't have ever bought a house in your life. It is a poor term since it is confusing. It sounds like you are on the loan now which means you can't be a first time home buyer.

Yes, you can get a loan solely based on your income and credit and with just your name on the loan. You are not buying it from your wife, just getting a new loan and that pays off the old one. You could add your wifes name to the deed later.
  • July 30 2013
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Profile picture for wetdawgs
You are not required to refinance through BoA.   Interest rates quoted will take into account the mid credit score of whoever has the lowest score.   If one is at 640 and the other at 800, the 640 prevails.

If you chose to buy the house from your wife, chances are good you'll incur more fees and transfer taxes than  refinancing.   There are no magic first time home buyer bonuses in lending. The fed tax $8000 for a few years ago is no longer available.
  • July 30 2013
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Profile picture for Peter Donovan
"It sounds like you are on the loan now which means you can't be a first time home buyer."
No I am not on the loan. I just make the payment :)

" Interest rates quoted will take into account the mid credit score of whoever has the lowest score."
Exactly what the BofA guy told me. He landed on somewhere around 640ish.

"If you chose to buy the house from your wife, chances are good you'll incur more fees and transfer taxes than  refinancing."
Approx how much more are we talking? Is it worthwhile in the long run? or I should try to refi with someone else. If I am not on the title or deed, how do I refi under my name?
Should I just add my name to the title, wait 6 months and then refi just under my name? 
  • July 30 2013
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Several things need to be considered.  Even though you are not on the mortgage or title if your state is a community property state then it is considered your debt as well.

The other question I would have is how old the FHA loan is?  Prior to May 2009 you get better mortgage insurance rates than if the loan is newer than that.  In that case an FHA Streamline Refinance would be a great way to go.
  • July 30 2013
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I am a consultant with a National Lender, and just did a loan for a customer in the exact same situation. The loan can be done as an FHA streamline, with no appraisal needed, the only necessity is that you can income qualify on your own. If that is the case, I would be happy to assist you with the process. Please feel free to contact me through my profile at anytime. Thank you and good luck. 

  • July 30 2013
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