Expert: Dick Dennis - 10/31/2008

Question
My mother is having difficulty paying her monthly mortgage payments (About $1300) and doesn't plan on the situation changing. She is considering walking away because houses just aren't selling in her city, but that would of course ruin her credit. My husband and I do not live in the same state as her, but we love her house and are interested in buying it.  We think we would start living in the house 3-5 years from now, and my mother would continue to live in the house until then. If we never end up living in it we would want it to be a good investment to sell when the market picks up. She owes about $130,000 and the house is worth about $200,000.  We have never owned a home and would not have much money at this time in terms of a down payment.  I'm wondering what our options are (buy it and rent to her, pay half the mortgage and she continues with the other half, etc.) and what would be the advantages or disadvantages to each option.  Also wondering what would be a fair price to pay in this situation and if lawyers or real estate agents are necessary since we trust each other very much.  Thanks for your help.

Answer
If your mother is having difficulty with her monthly mortgage payments, there is another idea that perhaps she and you might appreciate: If she can show where her income just will not be able to hold up making those payments, her obligation could be modified. That is when her mortgage(s) is modified to the extent that either the full amount is shaved down and/or her monthly payments are cut down. I can arrange for that, if you choose.

However, if her house is really worth that much, the mortgage lender just might not be receptive to modification since your mother would have about $70,000 equity in her house.

If you are thinking of buying it now, be aware that banks and other lenders are being very choosey who they would lend to. If you have very good credit, then you will have a better chance. But the lenders are requiring some down payment, the more the better.

There are another couple of ways for buying her house now and it would help your mother in that it would cut her mortgage monthly obligation. And you and your husband can do it without too much problem. You can do it with a lease/option. You would pay, say, 25% to 50% of her monthly mortgage and you are credited with those payments until the day a few years from now when you are credited with those payments as part of your down payment.

The other way would be for you to buy the house "subject to" the existing mortgage. You then become fully responsible for paying the mortgage (between your mother and you because the bank would not exactly be happy with that arrangement, but they probably would turn a blind eye to that arrangement as long as the payments are made on time in light of how real estate is these days).

I wish you well.

Dick Dennis             dixiedee13@aol.com