Expert: Lori Frankfort - 3/1/2009

Question
Hello Lori,

My parents are planning on buying a house in southern California.  Their intention to buy a house is to leave something for me when they pass away.  My intention is for them to live in a house instead of in an apartment.  If I could, I would buy a house for them.  But as a recent college grad, I do not have the capacity to make down payment.  My parents can make the down payment from their lifetime savings.  Since my parents are in their 50's (we are immigrant family), I’m planning on pick up their mortgage when they retire from their jobs.  I also intend to help them pay their mortgage all along the way.  I cannot take on the full mortgage now.  But as I rise through the ranks in my military career, I can take on the full mortgage in 6-10 years, which is right around the time they are ready to retire.  (I’ll not be living in the house so VA home loan is not applicable.)

Since they are going to give the house to me, I don’t want to pay a huge tax when they transfer the house to me (I’m helping with their mortgage along the way anyway.)  Is there any way for them to buy their house with my name so that there will be a minimal tax when the transfer happens?  Or is there a way in which they don’t even have to transfer it to me?

Thanks,
-Ron

Answer
Hi Ron,

You can purchase the home WITH your parents, so your name is on the title AND the mortgage.  If you tell the escrow company your intentions they can help you determine the best way to take the title so that when your parents pass away their ownership transfers to you.  Purchasing with your parents doesn't require that you put any money down, that's between you and your parents.  The only issue would be adding you to the mortgage, which should be able to happen if you have a good mortgage broker.  Keep in mind that you'll be liable if your parents default.

Best,
Lori