Should I co-sign a house for my parents? Help!

Long time lurker, first time poster.



So I have a complicated (but probably common of late) situation.



My parents house was foreclosed on two years ago. They were financially irresponsible, and ignored the phone calls and bills piling up for requests of mortgage payments they couldn't afford (because they didn't lock their interest rate).



They've been renting a place for the last two years, but the lease is now up and they're being forced to move out. They assumed he would rent it to them again for another year, but he recently changed his mind and is asking them to leave before the end of the month.



They've been shopping around for a house the last few weeks (to purchase), and found some place but of course they can't be approved for the loan because of the foreclosure on their history. However, they asked if they could run my credit history and my brothers. I have a very high credit score, so they said I would be approved for the loan if I purchased it co-signed with my brother (since I live outside of the area, they need someone local on the deed I assume).



Now, my question is... do you think I should do it? They called me this morning, and laid it down on me. They're being forced to move out of their current house within two weeks, so it has to be quick. They wanted to FedEx me the papers to sign, assuming I would do it without question. But I don't want to ruin my credit history if they screw up again.



Here's some background info:



-- They're in their mid-late 50's

-- My dad is retired, my mother works a low paying job that's very insecure

-- My dad has a good pension, which is what is their only income

-- They have around $115K in cash I believe

-- The house is around $300K asking price, I believe

-- They're trying to do a FHA loan, and it would be me and my brother signing the deed (I don't think my parents would even be signing it)

-- I'm 24, single, living in SoCal (the'yre in Norcal) and do well for myself working full time



My parents say the real estate agents were telling them that they can remove me and my brother from the deed in one year or so, when they can qualify for a loan themselves. That sounds sketchy to me.



It's all made more complicated with the drama with my parents. They don't understand that I want to do the most financially responsible thing, they think I'm betraying the family by not just signing it. My sister also lives with them, and I don't want them to be homeless or anything I just don't want to ruin my credit and chances at getting my own home in the future.



What should I do?

While I am sure that others will have much more lengthy explanations of their reasoning, I would just have to give you one huge resounding



<strong></strong>NO!!!!!!!!!!!!!



Absolutely, under no circumstances, should you do this. Please listen to others here as I really think that they will agree.

I'ld have to say, "No, also."

[quote author="Rookje" date=1257772563]Long time lurker, first time poster.



So I have a complicated (but probably common of late) situation.



My parents house was foreclosed on two years ago. They were financially irresponsible, and ignored the phone calls and bills piling up for requests of mortgage payments they couldn't afford (because they didn't lock their interest rate).



They've been renting a place for the last two years, but the lease is now up and they're being forced to move out. They assumed he would rent it to them again for another year, but he recently changed his mind and is asking them to leave before the end of the month.



They've been shopping around for a house the last few weeks (to purchase), and found some place but of course they can't be approved for the loan because of the foreclosure on their history. However, they asked if they could run my credit history and my brothers. I have a very high credit score, so they said I would be approved for the loan if I purchased it co-signed with my brother (since I live outside of the area, they need someone local on the deed I assume).



Now, my question is... do you think I should do it? They called me this morning, and laid it down on me. They're being forced to move out of their current house within two weeks, so it has to be quick. They wanted to FedEx me the papers to sign, assuming I would do it without question. But I don't want to ruin my credit history if they screw up again.



Here's some background info:



-- They're in their mid-late 50's

-- My dad is retired, my mother works a low paying job that's very insecure

-- My dad has a good pension, which is what is their only income

-- They have around $115K in cash I believe

-- The house is around $300K asking price, I believe

-- They're trying to do a FHA loan, and it would be me and my brother signing the deed (I don't think my parents would even be signing it)

-- I'm 24, single, living in SoCal (the'yre in Norcal) and do well for myself working full time



My parents say the real estate agents were telling them that they can remove me and my brother from the deed in one year or so, when they can qualify for a loan themselves. That sounds sketchy to me.



It's all made more complicated with the drama with my parents. They don't understand that I want to do the most financially responsible thing, they think I'm betraying the family by not just signing it. My sister also lives with them, and I don't want them to be homeless or anything I just don't want to ruin my credit and chances at getting my own home in the future.



What should I do?</blockquote>
There are a few questions that you need to answer before you can decide what to do because this is your immediate family (parents...I'd give up my life for my parents if I had to):



Can you pay the mortgage in case your parents aren't able to in part or in full?

If yes, are you OK knowing that you may not be able to buy your own home as quickly because you co-sign for them?

If yes, is the home at or below rental parity?



I would say if you answer "YES" to all of the questions then I would lean towards doing it. That being said, I really don't like how they are putting you between a rock and a hard place. You will not be able to remove yourself from the obligation until the loan is paid off or refinanced. Good luck with your decision because it will not be an easy on.

[quote author="tmare" date=1257774311]While I am sure that others will have much more lengthy explanations of their reasoning, I would just have to give you one huge resounding



<strong></strong>NO!!!!!!!!!!!!!



Absolutely, under no circumstances, should you do this. Please listen to others here as I really think that they will agree.</blockquote>
Normally I would also say HELL NO, but because it is his/her parents that are involved makes the decision a lot harder to make....especially if you are close to your family like some of us immigrants are.

There is a saying in the industry: <em>Once you are subprime, you are always subprime.</em>

[quote author="Rookje" date=1257772563]Long time lurker, first time poster.



My parents say the real estate agents were <strong>telling them that they can remove me and my brother from the deed in one year or so</strong>, when they can qualify for a loan themselves. That sounds sketchy to me.



It's all made more complicated with the drama with my parents. They don't understand that I want to do the most financially responsible thing, they think I'm betraying the family by not just signing it. My sister also lives with them, and I don't want them to be homeless or anything I just don't want to ruin my credit and chances at getting my own home in the future.



What should I do?</blockquote>


Hmm...Yes, your name can be removed from the Deed. But what about the loans that your name is under? Can they remove your good name from the loans?



Immigrant parents are the worse. They put this guilt trip on their kids as if their kids owe them the world. They can only relate to the old country mentality. They forget that the new country is not the same. In the new country, their kids have bills and other debt obligations. The immigrant parents don't take this into consideration. I say, "Forget about it!"

If they're good decent parents. They shouldn't "lay it down on you". They're your parents not your kids. And when they screw up your good name and credit. Do you really think they're going to care? Hell no!



I say avoid them. Disconnect your phone.



And don't feel guilty about it. They're using that old trick of ...."Boo hoo, we're your parents. You're our son. Don't let us down. If you don't help us. You're not a good son."......to that I say, "Buh humbug! Have a happy holiday."



Good parents don't put their kids into a corner. Trust me. They'll be ok. This is America. There are plenty of homeless shelters around. There are plenty of food even in the trash bins. (I remember there're websites for dumpster diving. You should tell them to google it.)



And if they need more help. There's a thread on here for some great coupons. Check out member: Cameray. But becareful with USCtrojanmanCPA he's a coupon wh0re.

[quote author="Rookje" date=1257772563]What should I do?</blockquote>


The answer largely depends on whether you want to have a relationship with your parents or not. Sure, they put you in a tough spot, but I'm sure you put them in a tough spot, too back when you were growing up.



Anyway, here's the point: unless you've got a check ready to pay them off for all the money they spent raising you, refusing them help is akin to throwing them off a speeding train. I would get the loan in your name, and they can pay *you* until the foreclosure clears their credit history and you can sell it to them for the balance due. Co-signing is a bad compromise because it puts you on the hook but they get all the benefit. If you own the house, you hold the power and if they screw you over, you can sell the house out from under them with no regrets or guilt.

Think it through carefully. What is your long term objective here? If it is to help support your parents in their retirement - what will happen if they mess up financially again and lose the house and their kids credit is also messed up and their debts stay with the kids? Will there be no money left for rent after debt payments and then the parents have to live in a tent or on the sofa of their kids rental apartment? What is the worst case scenario as well as the best case scenario, and are you prepared to live with that?



Also - why does a retired couple need a $300K house? The pension draws anywhere, the low paying insecure job is also easily transferrable. If I were them I 1. wouldn't hit my kids up to cosign and 2. would bite the bullet and go move somewhere really really cheap (ie. middle of nowhere, no tax state, with better job prospects than CA) and get another insecure low paying job. If I were to buy, it'd be some crappy apartment or house I could buy outright with part of the cash and invest the rest. Where is the living money going to come from when they are eighty, especially if we get some hyperinflation to pay off the deficit that greatly erodes the value of the pension? Sounds like they haven't learned, and are still trying to overconsume relative to their income.



If anyone needs the $300K house, it is going to be you in a few years time (get married, both working spouses need to be within commute distance of work, room for kids in the house).

I just don't understand why they can't continue to rent. It's as though there was only one rental in the world and since they got booted out of it, they now have no other choice but to buy. Why is that? I just can't see a 24 year old making a decision that has the potential to ruin credit for years to come.

I do not know what you should do.

I would ruin my credit for my parents. But then, I would do just about anything for my parents as long as it did not have negative effects on my own children.

[quote author="reason" date=1257778690]If they're good decent parents. They shouldn't "lay it down on you". They're your parents not your kids. And when they screw up your good name and credit. Do you really think they're going to care? Hell no!



I say avoid them. Disconnect your phone.



And don't feel guilty about it. They're using that old trick of ...."Boo hoo, we're your parents. You're our son. Don't let us down. If you don't help us. You're not a good son."......to that I say, "Buh humbug! Have a happy holiday."



Good parents don't put their kids into a corner. Trust me. They'll be ok. This is America. There are plenty of homeless shelters around. There are plenty of food even in the trash bins. (I remember there're websites for dumpster diving. You should tell them to google it.)



And if they need more help. There's a thread on here for some great coupons. Check out member: Cameray. But becareful with USCtrojanmanCPA he's a coupon wh0re.</blockquote>


Really? You would put your parents out on the street and let them eat from dumpsters before they screwed up your credit score?



I'm with USCtrojanmanCPA, most immigrant families would never even consider this. As for what you should do OP, If i were in your shoes I would just make sure i could pay for their mortgage regardless of how much they can contribute and decide on that, if i couldn't afford that house i would ask them to look at something a little less expensive.

[quote author="Rookje" date=1257772563]



What should I do?</blockquote>


Nothing.

[quote author="Rookje" date=1257772563]What should I do?</blockquote>


<strong>What do you want to do?</strong>



One point of clarification: money ? support



If you really want to help your parents it might make sense to take a trip up to see them, and investigate the situation for yourself.

If you've been a longtime lurker, you should be adequately equipped to ask some good questions at the source.



Taking the time to go is support.

Voicing concern about not wanting your parents to be taken advantage of is support.

Providing a rent vs. own breakdown is support.

Critical thinking is support.

Holding them accountable is support.



In the end, you'll have to make your own decision, even if you choose to go visit.

If it is not worth the trip, that might be telling to you, as well.

It may be difficult, but at least your actions will model your intentions.



Good luck,

IrvineRealtor



~~~~~~~~~



On a side note, I've gone through a very similar situation... which some of you know already.



In Sept 2006 some very close relatives felt the need to purchase beyond their means, out of fear.

While they didn't ask me for $$$ or to cosign (2006 - fog a mirror, get a loan), they did ask me to broker the deal, here in Irvine.

For their particular situation, it didn't make sense, so much so that I declined to be part of the deal after explaining my concerns.

They bought anyway, and another broker collected the $20K commission.

They've been in default since mid-2008, but are still in the house.

They showed up at my door and asked for help with a mortgage payment early this year. We gave it to them with the understanding that it would be the last $$$ they would see from us.

BK proceedings took place last week. I haven't asked about how it went.



I would much rather have just been wrong.

So many questions, so little time for you to decide.



1) Why are they being asked to move? Have they paid their rent on time? Have they trashed the place?

2) Why is your dad, in his mid-late 50s, not able to work to supplement his pension?

3) How much are they putting into the transaction as a down payment? How much 'skin' will they have in the game?

4) Will your dad's pension cover their living expenses plus the mortgage?

5) Why buy? What do they hope to gain from it? Is that realistic?

6) If they default, will that destroy your relationship with them?



I think if you get honest answers to the above, your becoming their banker will only cause you a great deal of pain and conflict in the future. Plan on making their payments. Offer to help them move to a new rental home.



The debt that children owe to their parents is repaid by being good, responsible citizens and great parents to their own kids.

Any parents whom put this kind of burden on their child is not good. Period.

[quote author="reason" date=1257811964]Any parents whom put this kind of burden on their child is not good. Period.</blockquote>


These types of situations will become increasingly common over the next few years. If it were my parents, I would figure out a way to assist them.



I second Nude's suggestion. Buy the house yourself.

As a parent of an adult child I would NEVER put my kids in that situation. Must be an ethnic thing to do

what your suggesting.



Tell them you will help them rent. It serves NO PURPOSE whatsoever for them to buy.

They have already failed at being in debt. Why do it again ?

Practice some tough love and get them a nice rental.

[quote author="CapitalismWorks" date=1257813417] If it were my parents, I would figure out a way to assist them. </blockquote>


There is a thin line between helping and enabling. Just sayin'.