Ask a Broker: How can I best help my in-laws qualify for a mortgage?

By Peter G. Miller

Q: My in-laws need to refinance. However, before they can get a new loan the lender is requiring that they pay off $5,000 in consumer debts. That's where we come in they want the money from us. Can we give it to them?A: The first question you need to ask is whether you can afford to give $5,000 without harming your financial position. If the answer is yes, then you should have several thoughts. First, consider yourself lucky that you have the money and can help. Many households are not so fortunate.Second, ask if the money is to be a gift or a loan. If it is to be a gift, then you should not have any expectation of repayment or interest. If it happens your in-laws ultimately repay the money, that's great, but not required.Third, if the money is to be a loan, then it must be disclosed to the lender and proper paperwork should be written.Q: Is it true that you are penalized if you purchase a house and then sell it before two years have passed?A: You may be referring to the federal capital gains requirement: Essentially, if a couple has lived in a home for two of the past five years and then sell, as much as $500,000 in profits ($250,000 for a single person) can be sheltered from capital gains taxes.However, this is a relative matter. It's best to avoid taxes if possible, but if you have a big profit and must pay taxes, that's a far better situation than having a loss. For specifics, please talk to a tax professional.Q: We just bought an existing home. The home inspector detected many hairline cracks in the foundation but said they were normal for a home of this age. We have now found that one section of the foundation was one to two inches higher than the rest of the foundation. We think two large trees are the cause.Our inspector did not detect the presence of the foundation and slab issues. Although he could not pull up the carpet to examine the slab directly, one of the windows would not close, the window frame was not rectangular, the front door was out of alignment, there were cracks in the stucco, there were patches in the dry wall, the roof line was raised in the area of root damage, the patio ceiling was raised and paint was chipping.If we had known about these issues we would not have purchased this house. Because of these problems we will sell, but since we need to fully disclose these problems to the next buyer we may not be able to sell the house at the right price. What can we do?A: Were these problems visible and obvious at the time you bought? What about the walk-through inspection before closing?There are some questions to ask: First, review the seller disclosure statement. Was it accurate? Second, did the inspector note the door, roof and window problems? Third, did you have a buyer broker? If yes, did he or she recommend the inspector? Fourth, is there any possibility that the cracks and other problems became suddenly worse because of weather or some other factor? An attorney can help you look at these questions in greater detail.Q: We have been renting since we sold our house two years ago. We have been looking to purchase a better home with a larger lot. We have made many offers but for different reasons have been unable to buy. Unfortunately, with the way market is going we cannot afford to buy a home at this time. What can we do?A: It often happens that with price appreciation those who own real estate cannot afford to buy their own houses at today's values. In your situation you lost the benefit of two years' worth of local appreciation by selling.I suspect you can buy a home, although it may not be your first choice. To see what you can afford, a good first step would be to review your finances with a local loan officer.There is, however, a caution: You have been unable to buy in a rapidly rising market. But what happens if you buy and then home prices in your community stabilize or actually decline? Such things can happen reason enough to buy a home that's readily affordable in good times and won't sink your finances if times get hard.Q: Im a tenant. My current rent is $1,500 per month and the deposit is $1,500, but the landlord wants to raise the rent. Can the landlord accept a deposit thats less than the new monthly rental?A: You bet. The amount of the deposit is negotiable. While its typically equal to a month or two of rent, it can be less. If youve paid the rent in full and on time and the property is well maintained, the landlord might be open to continuing with the deposit at its current level. Theres no harm in asking.Q: I heard from a couple of people that the price of homes and mortgages will be going down within the year. Is this true? Im trying to get my son to hold off on purchasing a home. Is not buying right now the best strategy?A: No one knows. A year ago few people would have guessed that interest rates would remain below 6 percent or that nationwide homes could appreciate more than 13 percent in a year.No less important, the answer to your question is not what happens nationwide, but rather what happens with a particular home in a specific community. Home values around the country do not move in lockstep. What happens nationally or in a metro area five hours from your home could be very different from the results you see locally. Content That WorksDo you have a question or a quandary about buying, selling or renting? Peter G. Miller, author of The Common-Sense Mortgage, specializes in providing real solutions to real estate dilemmas. E-mail your questions to peter@contentthatworks.com.