Buying a home is one of the largest financial decisions you will make in your life. What can make it more difficult is if you do not have the credit to get the home you need.
My husband and I were newlyweds and had just found out our first child was on the way. We happen to reside in an apartment that did not allow children-this is a problem.
We looked at a lot of homes and figured out with our income we could not afford to buy the house we wanted. I was 22 and my husband was 18. I was already in debt with a new car purchase and credit cards. He did not have any credit. Therefore, we tried the next option and looked into buying a mobile home (not really what either wanted). WE found a nice single-wide with four bedrooms, all the furnishings, and appliances. We did get approved but the interest rate was 17 percent; we also had nowhere to place this home. So here we were back at square one. My husband has an uncle, who is also a preacher, which he confides in and seeks advice from. He said he might be able to help us. Well without me knowing they look at this house together. My husband came home and tells me he has agreed to buy this house (did not really care what I thought) from his uncle. He took me to look at it and it was small, green, and very old. Not my idea of a home but it will have to do. His uncle sold us the home for 30,000 at a 7 percent interest rate for 10 years-not a bad deal.
When deciding to buy a home from a relative, there are a few things to think about first. Your relative may act as a landlord and try to tell you what you need to do with the house, instead of letting you do your own thing. In our case, the uncle took it upon himself to paint our house without asking. It was greatly appreciated, but it made us feel uncomfortable. They could possibly put restrictions on your property, in our case we cannot have any other family living with us, and no junk cars on the property (my husband is a mechanic). If for some reason you get behind on payments, you will have a family issue instead of a bank issue. If you decided you want to refinance through the bank and pay off the current mortgage it may cause hard feelings. Buying through a relative also can affect your credit. You will have a mortgage but it will not show on your credit report. This has caused problems with my husband and I when applying for credit we need.
One of the most important things to take care of is the deed of trust. This is the binding agreement between the parties. The deed of trust explains the details of the purchase between the buyer and the seller. I filed bankruptcy without my husband, since this mortgage was not on my credit they took it as I owned my home outright. I was in danger of losing my home. They told me in so many cases people had bought homes from a family member; they did not do the paperwork correctly resulting in losing their homes. We had the deed of trust so it worked out. Make sure there is a deed of trust filed at the courthouse to protect your home.
Buying from a family member can be a good thing. We recently wanted to pay off some credit card debt and decided to the bank take out a loan. The uncle loaned us the money and just added the amount on to the back of the house. We owed five years on the current mortgage, with the loan from the bank we would pay five years at 250.00 a month. The uncle’s loan made it to where we now owe eight years, but do not have that extra payment or the interest – we now have the ability to double up on payments. Any time we have wanted to make improvements (in our situation) the uncle has went out of his way to help with the labor, parts and financially. He has put a roof on the house, helped with patching the holes in the siding, planted grass, and leveled the yard. He has been a blessing.
There are many options available when buying a home. If making the purchase through a family member is the choice, take the time to make sure everything is done correctly. It could save you a lot of problems in the long run. You would not take out a loan or buy a car with out doing your home work so do not buy a house (even from family) without research.