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Purchasing From Yourself (Sort of)

Two individuals own a home outright.  The home was purchased with cash more than a year ago; the purchase money came from a first loan secured by non-real estate assets.  This first loan is not secured by the home.

The individuals want to obtain a mortgage in place of their existing first loan.  To do so would be considered a cash out refinance and would require 20% equity in the house.  They cannot put down that much money.

Consider this alternative: the first person quit claims his interest in the home to the second person; then the first person obtains a mortgage loan to purchase the home from the second person (the purchase price being essentially the original loan amount - no funny business with appraisals, etc.); the second person uses the proceeds of that sale to pay off the original loan.  Ownership now rests with the first person; the home is secured by a first mortgage; and the loan secured by non-real estate assets is paid in full.

Why not?  Perhaps a "red flag" will be raised because the first person's current address will be the same as the property address he is buying, but so what? 
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October 18 2013 - US
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Answers (5)

Okay.  That was more for example purposes.  How much do you need and what is the home worth

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October 18 2013
Riddle me this superfakeemail...how much is this house worth? How much did you borrow against the other asset(s)? Why did you do it that way? Convenience or qualification issues?

"To do so would be considered a cash out refinance and would require 20% equity in the house.  They cannot put down that much money.
"

The above statement leaves me wondering lots of things.
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October 18 2013
Your loan would be a cash out refinance in your name only, payoff the existing lien ( 20% LTV ) and 50% buyout of the 2ND person, total 70% LTV.
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October 18 2013
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Purchasing half the home with a small mortgage would not generate enough cash for the second person to pay off the first and original loan.
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October 18 2013
Since you both own the home this would be considered a refinance.  You would just draw up an agreement for what I am assuming would be 1/2 the value of the home.  The loan would be based on your qualifications alone. No money would have to come out of your pocket.  Happy to help and/or steer you in the direction of someone that can help if you would like to contact me through my profile.
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October 18 2013
 
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