Hello everyone!

I'd really appreciate your advice and help. Let me preface all of this with the fact that I really have ZERO experience with real estate, mortgages, etc.

[b]BACKGROUND:[/b]
This question is actually for my fiance (we are both in the Marine Corps). She loves her mother more than anything else in the world. And she would do anything to help and take care of her; and I would do anything to help and take care of my fiance. One of the biggest problems in her mom's life is her house.

[b]THE SITUATION:[/b]
She bought her house many moons ago for $125,000, but she would like to sell it. The problem with that plan, though, is that it's in a state of disrepair. The foundation is crumbling, the electrical is messed up, etc. Fixing the house to sell would NOT be cheap. She cannot afford it, whatsoever. Their family recently got together, and they were talking about it. One solution was floated. Her brother is thinking about buying the house for very cheap: the market value of the house (which, considering the issues, is likely quite low). He would fix up the house as a project. Then my fiance would buy (or co-sign?) a house for her mother; they found one at $65,000 that would fit her mom's needs; they do not intend to buy it right now, they were just doing preliminary research to see what was and would be available. The reason my fiance would buy it is because her mother's credit is pretty poor, and she would not be able to get a loan. Her mother, though, would be able to certainly afford the mortgage payment without much of a problem. Once the mortgage was paid off (or near to), my fiance would like to transfer/gift/sell it into her mother's name.

[b]THE QUESTIONS[/b]
The situation makes me extraordinarily nervous. For her mother, my fiance, and her brother. For their credit. For the loop holes. For the laws. There are a lot of variables involved here.

Very broadly,
1) do you have any advice?

Specifically,
1) are there as many variables as I imagine?
2) would a daughter be able to “gift” or “transfer” a deed/title on a house to her mother?
3) outside of your expertise I know, would this affect my fiance’s ability to get student loans, since she’d have property, a mortgage, etc in her name?
4) would my fiancé be able to buy the house “jointly” with her mother? That is, be a co-signer, etc? She would prefer this over buying it strictly in her own name.

[u]Very importantly:[/u] Are there any more questions that I’m missing? Any holes in the plan that need to be brought up to my fiancé, her mother, and her brother? This is just the beginning stages of my/our research, so I feel like I'm missing a glaringly obvious problem.

Her mother is a fantastic woman. She's fell on a lot of hard times, so her credit, her low income, and the state of her house is through no fault of her own. She supported 3 children by herself working two jobs. I’d really like to help her out.

Thanks! I'd really appreciate any advice or help.

Steve

You didn't state whether the Mother's house is 100% paid off, and she now owns it outright. Is that true ?

Your fiance can gift the house to her mother but there will be tax consequences. Talk to a good tax accountant.

This loan would affect your fiances ability to get financing down the line. The loan amount is added in to her total debt load when they figure her debt ratio. Talk to a lender.

Whether or not they can jointly buy the house together will depend on the credit of both and the lender involved. Again, talk to a lender.

I don't understand why the brother would buy it and the mother not have enough money from the proceeds to buy another house. Talk to a couple of local real estate agents and find out the market value of the house. The simple solution might be to sell it on the open market and use the proceeds to buy another house.

[quote=Vermont]You didn't state whether the Mother's house is 100% paid off, and she now owns it outright. Is that true ? [/quote]
It is not paid off.

Basically, they are trying to get her out of the house the easiest and most financially-intelligent way possible, while still exercising prudence, in order to help her start fresh. She and her brothers would basically do anything for their mom, include take on part of her financial responsibility. The current state of the house and her mother's finances are through no fault of her own. There have been a variety of things that essentially blind-sided her into an extraordinarily pressing financial situation; hence their willingness and enthusiasm to help their mom.

Speaking of prudence, I think it'd be worth the time to do the math/research on fixing up the house and its affect on the property. May end up in the black. But, like I said, the problem is the funds to do so.

Are there any questions that I should be asking an accountant or lawyer? I want to cover all my bases.

In regards to your questions concerning using the proceeds from selling the house on the open market:
She still owes on the house, so the proceeds would likely be quite small considering the state of the house. I dont know the exact figure that she owes on the mortgage (Im in the process of finding out), but there certainly will not be a profit of any sort.

So to clarify . . . . your Fiancé really wants to buy a new house (a replacement house) for the Mother, move her out of the current house, fix it up and then sell it for the purpose of discharging the Old Mortgage that the Mother still has on the current house, and then gift the new house to the Mother . . . . while continuing to have the Siblings be responsible for the New Mortgage ?

It all sounds altruistic and in keeping with Good Family Values . . . . but a Lender will probably not allow that "gifting" of the collateral out from under the New Mortgage. That would be inconsistent with good lending practices . . . . unless you also expect to pay off the New Mortgage with the proceeds of selling the Old House.

Speak to the current Lender and engage them in a conversation about the practicality of the proposal . . . . if I'm understanding it correctly.