About Eric Sexton Expertise All aspects of buying and selling homes including: General real estate questions, Contracts, Negotiations, surveys, title work and general questions about mortgages. I CAN NOT GIVE LEGAL ADVICE AND WILL NOT BE ABLE TO ANSWER QUESTIONS WHERE LEGAL ADVICE IS NECESSARY.
Experience
I have been a real estate agent for 6 years and a broker for 2 years.
Organizations National Association of REALTORS and Texas Association of REALTORS.
Expert: Eric Sexton Date: 6/25/2007 Subject: Buying a house for son
Question QUESTION: I am about to purchase a second home that I think will appreciate greatly in the future. I want to get this house for my son, who is not in a financial position to buy a house of this value (no credit, no job, in graduate school). I do not want him to undertake a mortgage, even if I am a co-signer. Is it possible for me to be the sole person financially responsible for the mortgage payments but the house to be in his name? In other words, could I do a warranty deed to him sometime in the near future even though I will be the only one on the note?
ANSWER: Nick,
Lenders will require that your name be on the deed.
If you want to change the deed in the future, there is usually what is called an "acceleration clause" in your note that states if the deed is changed, the lender can call your note due and payable in full.
This is not to say you would not be able to find a lender who will work with you, you just need to be aware of what could happen.
Good Luck!
---------- FOLLOW-UP ----------
QUESTION: Thanks for the reply. I was under the impression that federal law allows for a conveyance to a family member so that a due on sale clause does not apply. Is this true? Also, when you say the lender will require my son's name on the deed, do you mean that he will have to be listed as the primary mortgagor and myself as the co-signer? That is the whole thing I am trying to avoid. Is there a way that he could still be on the deed of trust but that it does not appear on his credit report as a mortgage?
Answer Nick,
I am not aware of the federal law you have described.
I see that I was not clear in my previous answer. Let me try again.
When you buy a house the lender is going to require the mortgagor's name on the deed of trust. Attempting to change the deed at a later date will make it appear to the lender as though the property has been sold. That is when the acceleration clause could be enforced (depending on the wording in your note).
I have been involved in a transaction in which the lender allowed a mother to be the mortgagor and allowed the mother and daughter's name on the deed. In this situation, the mother was using the house as a temporary residence (She primarily resided in another state).
Another option would be to purchase the property as an investment property. Doing so would likely increase the interest rate you are paying on the note. You could then charge your son rent on a lease. The lender will likely want to see the signed lease on the property before approving the loan, but not always. There might also be a question about leasing back to your son. Once again, this would be the lender's call.
Hopefully I have provided a more specific answer for you. Let me know if you have any other questions.
