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Refinance or First time home buyer?

Hi,
We will be taking over my in-laws house (they're retired now); it's a 4bd/3.25bath and 3,431 sq ft house on 12,250 sq ft lot they bought for $635K at the peak of the housing market in 2005. Currently, they owe $377K and the Zillow zestimate of the house is $392K. My dilemma is: Should we acquire this house via a refinance (my in-laws refinance their loan and add us on to the loan) or buy it from my in-laws as a first time home buyer? My in-laws will be living with us and vice versa so the point of doing this is to bring our monthly mortgage payment down (currently $3,200 at 30-yr fixed loan of 6%). We're new to this housing and loan stuff and are trying to assess the pros and cons of our 2 options. Any advice would be greatly appreciated. Thanks!
  • May 06 2013 - US
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Answers (2)

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Thank you Caroline.
  • May 07 2013
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Do in-laws want to continue to own the property jointly? I assume they are retired and you and or your wife are employed. Does your wife have other siblings whomay object? Who has excellent credit?
What is long term plan? What if someone gets divorced or dies? Ages of in-laws and what type of health insurance do they have will they apply for Medicaid or SSI in the future?  All the future options should be discussed. Take a yellow pad and handwrite an agreement as to your plans.

If you want to refinance, you must be on title before you apply.
If you treat the transaction as a purchase a lender will consider it not an arms length transaction.
You could structure the purchase as either a conventional loan with mortgage insurance or an FHA loan  with parents "gifting" the down payment. If you choose FHA you will have mortgage insurance until you sell or refinance conventional some year in the future.
You will need funds in a checking or savings account to make a purchase work - have a local lender write out all the numbers to compare.
As a purchase there will be a couple extra fees- transfer taxes, escrow and title fees are usually more on a purchase compared to same loan amount on a refinance.
  • May 07 2013
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