I’m New to This (lengthy post follows)

jweishorn · Joined: 13 Oct 2006 Posts: 1 Location: Port Angeles, WA

First, I would like to say “Hello” to everyone. This is my first post. I hope it’s on the right website, and I hope I hit the correct forum. If not, just let me know.

Here’s my situation…

24 months ago, my girlfriend’s father bought a house for us, and we agreed to make the payments plus a little extra for taxes and insurance. Now, he has sold another property and offered this one to us.

The people he bought the house from still had a mortgage on it, and he only borrowed enough to pay off the bank loan. We made one payment to him each month, and he split it into two payments; one for the bank loan, and another to the people he bought the house from to make up the full value of the sale.

We’re ready to sign papers titled “RESIDENTIAL PURCHASE and SALE AGREEMENT. THIS CONTRACT CONTROLS THE TERMS OF THE SALE OF THE PROPERTY. Copyright Washington Association of Realtors, Form A1 (7/98).” We do live in Washington State.

I initially have two questions concerning the situation.

First, how much have I really paid on the principal? He bought it 2 years ago for $44,425.00 at 6.75% interest to the bank and the people that sold the house. (Since the interest amount is the same for each loan, I’m assuming the actual amount owed to the bank and the former owners can be ignored.) We’ve made 24 payments of $450.00 toward his 15 year loans from November of 2004 through October of 2006, and he’s selling it to us for $44,000.

Regardless, the price is $44k. He put $2k down, made 2 months of payments while we were moving, gave us nearly $1k toward our move and spent over $2k making our previous rental habitable in exchange for rent from the landlord. I’m not complaining about the price at all. I just don’t know how to calculate it correctly, and for future reference, I’d really like to know what we’ve paid toward the principal.

Second, what are my future possible legal problems? Since we’re buying the property from my girlfriend’s father with legal documentation, I hope I can ignore the two loan payments he was making. Another of his properties was used as collateral for the bank loan. My girlfriend and I have been living together since 1997, and there’s nothing to indicate it won’t last longer.

We also had the house reassessed. The value 2 years ago was $44,425 and the current value is $65,665.

I’m new to this, so if I haven’t posted in the correct forum, I apologize in advance. If I haven’t provided the necessary information to answer my questions, please feel free to post and ask me what you need to know, and if I’m not asking the correct questions, feel free to let me know what I’m missing.

Thanks in advance,

Jim

Haplo · Joined: 20 Jan 2005 Posts: 2422 Location: Springfield, IL

Wow, between being sick and the late time that got me a little confused.

Let me first say welcome to the forums, Jim, and this is perfectly fine for posting your question.

So here are a couple things to consider.

If you mean if you had a normal mortgage and had started in 04 when your father purchased it how much would you have in principle? Not much. I don't have an amort. sched. here to check out, but I would say probably somewhere around $1500 at most. If you mean how much of his bank loan have you paid down in principle, there is no way to tell unless we have when his loan started exactly and the terms of it (you said it was a 15 yr.)

I'm not sure of any legal problems you'll run into, however if you're going to purchase the home from your father (I'm not 100% certain on the scenario, but this is good information to know anyway) there are a couple things you'll want to know. 1) If you intend to purchase the home with an FHA loan, if he does not live in the property as his primary residence then you are going to be limited to 85% of the value of the home. He can gift you the equity in the property, if enough is available (which it sounds as though it may in fact be) however your loan must be at or below 85%. On conventional, it's not as specific. You simply have to have 5% of the purchase price in your own funds, sitting in the bank. You don't necessarily have to use it for the transaction, but the 100% mark is going to be based on the purchase price of the property, not the value of the home.

Hope that gives you some information to start with.