SSThunder Posted May 17, 2007 Report Share Posted May 17, 2007 (edited) Ok. Here's the deal. My wife's sister is having trouble paying their house payment because they have a ARM loan. I guess they have reached the year limit on the loan and the interest rate shot up a lot on them. they both have bad credit. She's went to banks and mortgage companies and the best rate they can get is like 11%. My sister in-law asked if we could buy their house and rent it to them. We've both got great credit so it shouldn't be a problem getting a loan. The sister in-law owes like $110K on the house. How could this impact my/our credit score? I really don't want to add more debt to my credit report and I'm affraid it will have a negative impact on my score. They want to buy the house back after they improve their credit score. How long could that take? If I sell the house back to them after say 5 years, will I be able to sell it back to them for what they owe? I don't want to get into trouble for selling the house below it's value and that's something to consider. I'm not looking to make money from them, just help them out. I do plan to get into real estate real soon so I'm affraid this will hinder my plans. Any advice would be great. I don't mind helping them out but I don't want it to hurt our credit or future purchases. Edited May 17, 2007 by SSThunder (see edit history) Quote Link to comment Share on other sites More sharing options...
Black2003SS Posted May 17, 2007 Report Share Posted May 17, 2007 Sent you a PM...call me. Quote Link to comment Share on other sites More sharing options...
BOB47 Posted May 17, 2007 Report Share Posted May 17, 2007 Getting into a financial deal with family is one of the top 10 worst things to do. I understand the need to help relatives out but it almost always ends up bad for one or both of you. Make sure you cover your a$$ and get everything in writing. Without knowing the situation, I'd say they have bad credit for a reason and I'd run for the hills. Good luck. JMHO Quote Link to comment Share on other sites More sharing options...
CoolBlueSS Posted May 17, 2007 Report Share Posted May 17, 2007 Getting into a financial deal with family is one of the top 10 worst things to do. I understand the need to help relatives out but it almost always ends up bad for one or both of you. Make sure you cover your a$$ and get everything in writing. Without knowing the situation, I'd say they have bad credit for a reason and I'd run for the hills. Good luck. JMHO As much as you'd like to help them out I'd be leery of it. It could work out, but it could not. Like Bob said, doing any business with family of friends can be a nightmare in the making. Quote Link to comment Share on other sites More sharing options...
Black2003SS Posted May 17, 2007 Report Share Posted May 17, 2007 Especially if they are renting and they start paying you late, and you cant afford the payments on your own without their rent money, then your credit will suffer tremendously, not to mention family reunions will be miserable. If you are serious about helping them, give me a call. I have nothing to gain, but its easier to discuss something like this than type it out. Quote Link to comment Share on other sites More sharing options...
brobradh77 Posted May 17, 2007 Report Share Posted May 17, 2007 I personally would not do it. They have truouble making payments as it is and knowing that family is renting them a house they may start missing on their payments or being late I have seen it before and you get stuck making the payments not them because they have nothing to lose but a house and have to move but you will have to deal with that house payment until you can find another renter and deal with the credit problems if you cant afford 2 house payments fpr a while. On top of that you can have too much credit and that is just as bad as no or bad credit. My .02 Quote Link to comment Share on other sites More sharing options...
misterp Posted May 17, 2007 Report Share Posted May 17, 2007 I see a train wreck coming. I've got no problem helping family, but in this case if they haven't cleaned-up their financial situation by now chances are that they won't be any better able to pay you and your wife than they are paying the ARM now. And you think things are tense now, imagine what that situation would be like. I think the biggest predictor of future performance is past performance. I think you will end up stuck with a piece of property that will not improve your marital wealth and your in-laws will not be able to pay you. Plus, you will be a landlord meaning that you would be responsible for maintenance and upkeep and repairs on the property. OTOH, if their property is a prime piece of real estate and it's value (as an investment) will greatly improve your wealth and you plan to sell it in a few years for a profit then ok maybe consider it. but outside of that I would tell your wife if she wants to help her sister then she can do so out of her own pocket, not out of your guys' "marital pocket". If the inlaws really wanted to make that house payment bad enough and fix their credit they would do *something* and change their lives like realign expenses or different job or ??? It is not YOUR fault they got themselves into a neutron bomb loan. Mr. P. Quote Link to comment Share on other sites More sharing options...
Black2003SS Posted May 17, 2007 Report Share Posted May 17, 2007 On the flip side though Mr.P, bad things happen to good people and its not always financially bad decisions. And recovery from the slippery slope of financial ruin is probably harder than quitting smoking or losing weight. I see it everyday. The only way this would work is if SSThunder can afford the home on his own without having to rely on rent from them. Also, go into with the understanding that if they screw him over on even one months payment, they forfeit all rights to the home and he can sell it for whatever market price he sees fit and retain any profits (I'm sure he would give most of it back to them, but you understand what I mean.). We also dont know what the home is worth, what is owed on the home, etc. If there is a lot of equity, its a good buy for him, if not, they could walk away and he's stuck holding the bag. Quote Link to comment Share on other sites More sharing options...
brobradh77 Posted May 17, 2007 Report Share Posted May 17, 2007 In a nutshell protect YOUR family first. I made the mistake of helping my ex get a car and when it didnt work out guess who got stuck with a $450 a month car payment on top of my $550 Trans Am payment me. I couldn't doit and trying to sae my credit I struggled only getting myself deeper in dept. To this day its been almost 8 years I am still paying for that mistake my credit has yet to fully recover. Quote Link to comment Share on other sites More sharing options...
SSThunder Posted May 17, 2007 Author Report Share Posted May 17, 2007 Sent you a PM...call me. I'll give you a call when I get back from vacation. Thanks, Jeremy Quote Link to comment Share on other sites More sharing options...
misterp Posted May 17, 2007 Report Share Posted May 17, 2007 On the flip side though Mr.P, bad things happen to good people and its not always financially bad decisions. And recovery from the slippery slope of financial ruin is probably harder than quitting smoking or losing weight. I see it everyday. The only way this would work is if SSThunder can afford the home on his own without having to rely on rent from them. Also, go into with the understanding that if they screw him over on even one months payment, they forfeit all rights to the home and he can sell it for whatever market price he sees fit and retain any profits (I'm sure he would give most of it back to them, but you understand what I mean.). We also dont know what the home is worth, what is owed on the home, etc. If there is a lot of equity, its a good buy for him, if not, they could walk away and he's stuck holding the bag. Oh I totally agree. And I know the slippery slope of financial ruin you speak of, I went totally bust in my marriage, I understand the bad things happening to good people. But I would only enter this deal from the perspective of an investor, a win-win type of arrangement where you win and the in-laws win. As long as the property will make you wealth (equity) and you can afford to do it then yeah ok I would consider it; but if the property won't make you a return then it's just going to be a drain on your marriage. You are not there to be your in-laws' marital counselor or financial savior - they've got to turn it around for themselves; just make your position CRYSTAL clear you are only giving them "an opportunity" no more, no less - they've got to accept that if they blow it you are not in a position to carry them at all and will have to cut them loose. Mr. P. Quote Link to comment Share on other sites More sharing options...
SSThunder Posted May 17, 2007 Author Report Share Posted May 17, 2007 The sister in-law use to strip so she paid for things with cash so she doesn't really have any credit. Her husband had a loan he didn't pay off or something like that when he was younger. He's got a good job now but the ARM kicked their house pyament up like $200+ so it's made it really tough on them. They have 3 kids so that's probably were their money goes. They don't have car payments to make, just the house and bills I believe. The wife and I can afford the 2nd house payment if they couldn't. I wouldn't let them live there for free thought. I would kick them out if I had to and sell the house. They are good people and I don't think they would not pay the payment. I just hate tieing up my credit in the house. I want to buy some rental properties pertty soon. I'd think the house is worth more than they own. The husband tried to help his credit by paying off his debts before they bought the house. Quote Link to comment Share on other sites More sharing options...
nuzman Posted May 17, 2007 Report Share Posted May 17, 2007 Sigh...ARMs, the scourge of the home mortgage industry. Great when the market's on fire, great for the lenders when the market's cold. IMO, buy the house and treat it as an investment. You wanted to get into the market, now's your chance. Sign a sale/lease-back with a right of first refusal contract with your in-laws(?). Make sure they understand, in writing, that they are selling the house to you and if they breach their agreement you are under no obligation to sell it back to them. They fail to pay the rent then evict 'em. If everybody is clear from the outset on what the deal is, and it's in writing, nobody is allowed to whine about it later. Oh, and of course, hire a real estate attorney to handle the contract drafting. Remember, like baseball, there's no crying in real estate. Quote Link to comment Share on other sites More sharing options...
Black2003SS Posted May 17, 2007 Report Share Posted May 17, 2007 AHving another real estate loan on your credit won't affect the score. However, having the payment included in your debt to income ratios could make it difficult to qualify for other payment oriented purchases like cars, furniture etc. However, you can claim the rent they pay as income and it will be another tax write off for you as well. We are starting to really open a can of worms. For exact truthful information on how your credit really works go to www.myfico.com Debunks all myths your uncle frank told you at the family bbq last summer how the government is out to get you before the aliens do! Quote Link to comment Share on other sites More sharing options...
nuzman Posted May 17, 2007 Report Share Posted May 17, 2007 The basic rule of thumb for consumer financing: Good Debt: secured, fixed-payment-schedule loans such as mortgages and car payments along with a good track record of paying them on schedule Bad Debt: credit cards and unsecured debt along with a bad track record of making your payments Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.