Do You Need a Realtor to Buy a House from a Family Member?
A realtor is not required to purchase or sell property in the state of Maryland. If a buyer and seller agree not to use a realtor, there is nothing illegal about doing so. When family members are buying and selling property to one another a realtor is often times not used due to the comfort levels of the parties involved with one another. That being said, sometimes one party in the transaction between family members may not feel comfortable with all the moving parts that take place in a real estate transaction and to protect both sides, they may insist upon using a realtor.
Can I Buy Parents House Under Market Value?
As long as both parties agree to the sales price then you can sell your home to whomever you like at whatever price you like. If you are buying your parents home and obtaining a mortgage to do so, the lender is going to finance the home based on the agreed upon purchase price or appraised value, whichever is lessor. In this instance, the home purchase price would be less, so the financing would be based on the purchase price.
Before you agree to do this however, it would be imperative to discuss your plans with a tax or financial advisor so that both parties understand the tax implications of selling a home under value or for a market price well below the current worth of the property. Gift Tax versus Estate Tax, and Capital Gains Tax are all tax implications that you should be educated on.
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Can You Sell Your House to Your Child for $1?
As long as both parties agree to the sales price then you can sell your home to whomever you like at whatever price you like. If you are buying your parents home and obtaining a mortgage to do so, the lender is going to finance the home based on the agreed upon purchase price or appraised value, whichever is lessor. In this instance, the home purchase price would be less, so the financing would be based on the purchase price.
Before you agree to do this however, it would be imperative to discuss your plans with a tax or financial advisor so that both parties understand the tax implications of selling a home under value or for a market price well below the current worth of the property. Gift Tax versus Estate Tax, and Capital Gains Tax are all tax implications that you should be educated on.
Can I Add Someone to My Mortgage?
Typically you can add someone to your existing mortgage only during the process of refinancing the loan. You can add someone to the title however usually at any point by working with a title attorney who understands the rules and regulations in your state and the most practical way of adding an entity to your home’s title.
Most types of financing, such as FHA, VA, USDA and Conventional mortgages, allow for friends and family members to be a part of your loan even if they will not be living with you. There are different parameters to this for example FHA allows for only “close friends and family” to be a part of your mortgage. If your best friend or cousin are wanting to be on your loan then you will be asked to provide proof to establish the close relationship.
“Typically you can add someone to
your existing mortgage only during
the process of refinancing the
loan.”
Can I Sign My Mortgage Over to Someone Else?
Conventional mortgages are NOT assumable which means that you cannot sign over the mortgage to another person. FHA and VA loans however ARE assumable. An assumable mortgage is a type of financing arrangement whereby an outstanding mortgage and its terms are transferred from the current owner to a buyer. By assuming the previous owner’s remaining debt, the buyer can avoid having to obtain their own mortgage.
The final decision over whether an assumable mortgage can be transferred is not left to the buyer and seller. The lender of the original mortgage has to approve of the mortgage assumption before the deal can be signed off by either party. The homebuyer must apply for the assumable loan and meet the lender’s requirements, such as having sufficient assets and being creditworthy.
Is it Illegal to Sell Your House to a Family Member?
No, it is not illegal to sell your home to practically anyone that wants to buy it. There are always exceptions to this, but in general, if you want to sell your house to a family member, there are no state laws or lending guidelines that prohibit you from doing so.
What Credit Score is Needed to Buy a House in Maryland?
FHA provides the most flexible qualification terms to purchase a home in Maryland or any other state. FHA guidelines allow for anyone to purchase a home with a credit score as low as 500, however if your credit score is below 580, then you are required to put down a minimum of 10% as your down payment, versus if your credit score is 580 or above, the minimum required down payment is only 3.5% of the purchase price. The lower your credit score however, the more difficult it may be to qualify but FHA doesn’t judge your credit score as harshly as other types of loans.
Buying a House from a Family Member that is Paid Off
If you are buying a home from a family member that has no mortgages or liens on the property, that fact alone will typically not affect the process of purchasing the home. As long as both parties agree to the sales price then you can buy and sell your home to whomever you like at whatever price you like.
If you are buying your parents home and obtaining a mortgage to do so, the lender is going to finance the home based on the agreed upon purchase price or appraised value, whichever is lessor. In this instance, the home purchase price would be less, so the financing would be based on the purchase price.
Before you agree to do this however, it would be imperative to discuss your plans with a tax or financial advisor so that both parties understand the tax implications of selling a home under value or for a market price well below the current worth of the property. Gift Tax versus Estate Tax, and Capital Gains Tax are all tax implications that you should be educated on.
Lower monthly payment and assurance that your
monthly principle and interest payments will never increase.
Mortgage Assistance Maryland
The Maryland Mortgage Program, also referred to as the MMP, is a state issued mortgage program that is designed to make the down payment and monthly mortgage payments more affordable. There is a network of approved lenders through which you go through to obtain a loan through the MMP.
There are specific guidelines and criteria that you must meet in order to qualify for a loan through the MMP that deal with such things as your credit, income and assets, so it is critical to find a lender that can explain the pros and cons of the particular program that you are interested in.
The process of the MMP is typically more difficult than that of applying for a regular FHA loan, so as long as you are prepared to put in the time and effort, the MMP can provide you a positive outcome for your new home purchase. Interest rates for the MMP are posted on this link:
How to Buy a House from a Family Member with Cash
Buying any home with cash in hand puts you in a great position to be the preferred buyer as well as being able to close on the home much faster than if you needed to obtain a mortgage. If you are buying a home with cash you would most likely be required by the seller to show “proof of funds” so that they are comfortable accepting your offer, and you would then also be under contract if realtors were involved.
If you are buying a house from one of your family members, using all cash, then all the same rules apply with the potential exception of having a formal sales contract with realtors involved, as that would be determined by the level of comfort each family member involved had with the other.
Maryland Teacher Home Loans
Being a teacher in Maryland often gives you access to financing programs designed to reward you for your service and dedication to our kids. There are national programs such as HUD’s Good Neighbor Next Door and HUD’s Teacher Next Door programs, which you can research simply by using Google. There are also local programs, some of which have been around for years and others that are created based on demand, which are typically available to teachers and first responders such as firemen, policemen, and so forth.
Remember, if you are a teacher or first responder, but you are also a veteran, make sure you let your lender know that you might be eligible for a VA mortgage loan which can have some of the most favorable terms of any mortgage out there.
Buying a House from a Family Member with No Deposit
When buying any property in the state of Maryland, there is no requirement for a deposit from the potential buyer to the seller. In most cases however, the seller will require a deposit be held in escrow so that the seller has a financial recourse if the buyer doesn’t meet certain minimum requirements set forth by the sales contract. In addition, a deposit made engages all parties to move in the right direction at a reasonable pace.
When buying and selling homes between family members occurs, there is still no legal requirement for a deposit and so the decision as to whether to require a deposit is left up to the seller of the property.
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GET PRE-APPROVEDWho Qualifies as a First Time Home Buyer in Maryland?
You are considered a first time home buyer in the state of Maryland if you have never owned an interest in residential real property in the state that has been your principal residence. You can be a co-signer or a co-borrower on a loan in the state of Maryland, or a primary borrower, as long as the property was never deemed your principal residence. If you qualify as a first time home buyer, you are exempt from the State of Maryland Transfer Tax automatically, which can save you in the hundreds, sometimes thousands of dollars in your closing costs.
First Time Home Buyer Classes in MD
First time home buyer classes can be a great resource for people that either have no clue about what it takes to begin to qualify for a home purchase or for people who don’t want to feel pressured by a loan officer and just want to ask questions without having to provide anything in return. Not all banks or lenders offer these educational classes so it’s best to search for them online to determine if there are any being offered in your area. If you cannot find one, then your next best bet is to either contact a loan officer or a real estate agent who can help put you in touch with someone that does offer education for first time home buyers or who is willing to put in the extra time and hand holding that is often times required.