Q: My father recently purchased a single-Family home at auction. What is the best way for me to get a loan for 60% equity?
We're trying to understand the laws and process to determine the best way for me to live in the house and pay back the Money to my father. We are trying to avoid as many taxes and fees as possible.
A: The answer depends on who is asking. For instance, the best thing for your father is for you to obtain a loan and to pay him the full purchase price in exchange for a deed. He then walks away and you live in the house. The best thing for you might be an option to purchase, or a rent-to-own. These are tricky documents to write, and it means your father is waiting for his money while the property is locked up in your recorded option for possibly years. Whatever lawyer you bring this to will have to ask "who is the client?" The advice differs as to each of you.
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A: To answer that, I need more details. If you are under a foreclosure, auction setting with a potentially fluid and firm deadline, and if you lack resources to close, there are special things you need to do now to avoid losing your deposit, like marshaling your assets, getting an appraisal, and seeking expensive, transitional funding. If you have time, like your father already bought the house and you need to qualify for a mortgage to buy it from him or pay him back, you need a loan and a title agent. What you need now is a private consult with a lawyer to explore the situation.
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A: If your father owns the property free & clear and he is looking to give it to you, in exchange for you paying him back, this sounds like a family mortgage situation. This is documented by a note and mortgage/deed of trust. My firm helps clients set up family deed transfers and family mortgages, as do other attorneys in this state. Some private mortgages by unlicensed lenders are no longer allowed in this state, but Maryland does still allow parent/child mortgages.
Typically if a mortgage is recorded at the same time of purchase, there are no "extra" taxes on the mortgage price. However, anytime a buyer givse someone money in exchange for real estate (whether it is paid in lump sum or over time), there will be transfer and recordation taxes. The exact amount varies from county to county.
A parent-child transfer is exempt from certain transfer and recordation taxes to the extent there is no money exchanged, and a purchase money mortgage may be exempt from taxes when it is recorded at the same time or close to the deed, so it helps to sit down and talk the specifics over with an attorney.
While I hope this general information helps, it doesn't take the place of engaging an attorney. You're encouraged to seek out one sooner rather than later to talk over your options.
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