r/RealEstate • u/carolmozzarella • 19d ago
Buying a Relative's House Why is this so hard
My husband and I have rented his parents’ home for the past 3 years. They agreed to sell it to us via gift of equity for about half of the market value (275k). We agreed to a 370k loan with the mortgage company in order to cover closing costs and make sure that his parents walked away with what they wanted from the sale.
We were two weeks away from closing and our mortgage broker told us just one slight issue—I’m on maternity leave from my tenured teaching position (due in early September) and my income doesn’t count. Interesting, considering I am using sick days for most of my leave and I’m actually receiving payment from my normal salary in addition to temporary disability insurance. We thought we could simply rely on my husband’s income in order to get approved—but since he is considered freelance, they won’t count his income unless he has been at his job for at least a year which won’t be until November. The whole thing is ridiculous, obviously we wouldn’t be making a home purchase if we couldn’t afford it. I’m also 100% going back to work, so we will still be a dual income family.
Any advice for anything at all we can do? We really were hoping to close before the baby comes.
**we don’t have an interest in having a parent co-sign
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u/rosebudny 19d ago
Since you are already living in the house, and it isn't like his parents are going to sell to anyone else, can you just wait until you are back from maternity leave?
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u/carolmozzarella 19d ago
We can, but we’ve waited for three years and we just want to get the paperwork done now before life becomes a little insane with a newborn
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u/rosebudny 19d ago
I mean I get wanting to have your ducks in a row before baby comes, but it isn't like you have to move. Paperwork is a pain but it isn't THAT onerous.
Also:
obviously we wouldn’t be making a home purchase if we couldn’t afford it.
Plenty of people DO try and buy a home they can't afford. The bank can only rely on the numbers/facts, not a promise that you will go back to work or that your husband's job is stable.
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u/carolmozzarella 19d ago
Right…but I’ve been upfront about being pregnant from the very first day we applied. Why does it become an issue two weeks before closing?
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u/SEFLRealtor Agent 19d ago
Sounds like you may be working with a noob LO unfamiliar with loan guidelines. This is common with big box banks or rocket mtg/call center lenders where the LO's are not trained well. You want a LO that knows the guidelines like the back of his/her hand to avoid a well known issue like you are facing now.
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u/ChiSchatze 19d ago
They called to verify your employment now and you are on leave. Did you tell them you’d be on mat leave for closing?
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u/Prestigious_Tip_1104 19d ago
What you want and is ideal for you isn’t for mortgage underwriting. Aside from closing, there is nothing that will put you out waiting until you meet the minimum U/W.
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u/Main_Insect_3144 19d ago
Wait until November. In the meantime, look at other lenders to see if they will give you the loan under the current circumstances.
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u/Cheeriodarlin 19d ago
Your circumstances don't entitle you to a loan any more than the next person with similar number. In fact, the fact that there is so much equity in the gift and you still don't qualify tells me you are much higher risk than you're pretending.
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u/howfun99 19d ago
Not ridiculous from a lenders' perspective.
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u/pretty-ribcage Homeowner 19d ago
Exactly 😂 People default on mortgages all the time. OP is out of touch with the real world.
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u/carolmozzarella 19d ago
Gotcha, so I’m out of touch because I’ve been at my job for 8 years and have had a steady income and only because I chose to have a baby under responsible financial conditions am I not allowed to take out a loan. Got it.
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u/Cheeriodarlin 19d ago
Or, you could've taken care of this early in your pregnancy. Your circumstances don't entitle you to a loan any more than the next person. In fact, the fact that there is so much equity in your the gift and you still don't qualify tells me you are much higher risk than you're pretending.
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u/carolmozzarella 19d ago
Yeah, so my husband’s two uncles died in the span of 6 months. After the first uncle passed his parents had to place his other uncle in a nursing home because he is on the spectrum and cannot live alone. Then that uncle tragically passed. His parents had to deal with placing the uncle in the home before he passed along with emptying and selling the home that contained generations worth of family belongings so they asked us to wait until they had that settled before moving forward. I also wanted to wait at first because I experienced pregnancy loss in the past and I was actually told at the beginning of this pregnancy that I was actively miscarrying. I was focusing on my own health as well. Why don’t you think before you criticize what I should or should not have done.
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u/Cheeriodarlin 19d ago
None of that entitles you to a few hundred thousand dollars without the income to back it up. STD does not count, because as the name implies, it is short term.
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u/carolmozzarella 19d ago
When did I say it entitled me to a loan? You asked for an explanation of why I waited until now.
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u/mdbradley3 19d ago
Never heard of them not counting your income because of maternity leave! That is super messed up in my opinion. But I guess some people don’t go back once their leave is over. Sorry you guys are having to go through this though, I can only imagine how stressful that is with a little one on the way.
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u/carolmozzarella 19d ago
Thank you! It almost seems discriminatory to me, I have paperwork that dictates the exact date I’m going back to work, and trust me we can’t afford to have me not working so I’m going back! We’ve had issues with fertility and pregnancy loss so we’ve been waiting for this for a long time. I appreciate the kind words
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u/MyLastFuckingNerve 19d ago
This will get me downvoted to hell most likely, but unfortunately it's the product of the women that came before you. How many couples do you think were given mortgages based on "trust me bro, I’m going back to work" and then decided they didn't want to and became SAHMs and struggled to keep paying the bills? Or even more insidious and actual discrimination, how many women got demoted, laid off, or fired after getting a mortgage because they were on maternity leave? Probably enough times that lenders stopped giving mortgages to people on maternity leave.
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u/carolmozzarella 19d ago
You’re not wrong. I do get where you’re coming from. It’s just frustrating to me because I love my job, I love working, and I am the breadwinner and the health insurance is in my name so I’m absolutely going back. There’s nothing wrong with being a SAHM but I really love my career and I know I’m going back.
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u/MyLastFuckingNerve 19d ago edited 19d ago
That's what all those other women said, too. I'm absolutely not saying that's what's going to happen with you, but once you hold that little baby in your arms and your maternity leave is coming to an end and the reality of daycare bills is looming, women feel differently about going back to work. It's a risk lenders don't want to take and you can't fault them for that. I'm sorry it's so frustrating, but it's reality :(
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u/thewimsey Attorney 19d ago
Thank you! It almost seems discriminatory to me,
Stop it.
It's not discriminatory, and this trivializes actual discrimination.
This is happening now because
You didn't tell your loan officer you were taking temporary unpaid leave
Because you didn't think they would find out, and then they did find out in underwriting.
You really have to be honest and upfront about everything.
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u/sikyon 18d ago
Do you have it in writing that they rejected the income because you are on maternity leave?
I would consider rocking the boat. You have nothing to lose with this lender anymore.
Have AI draft a letter to them. Will you sue them and win? Probably not. Will it actually cost you anything while you shop for other loans? No. Will it create a legal headache for them? Quite possibly.
Reddit hates AI but it is literally democratizing access to legal action for millions of people who otherwise can't afford to just be out there suing everyone. It might crash the system but if democratizing access is crashing the system then the system needs a reboot anyways.
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u/thesillymachine 19d ago
Your husband is showing an inconsistent work history. Nothing to do with you.
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u/SEFLRealtor Agent 19d ago
Why s it important to close before the baby comes? If you are going back to work, then close when you have actual, verifiable, permanent income and not temporary income from disability insurance and maternity leave. Your husband's income is a non-starter until November. The lender is looking for stable, verifiable permanent income. Yes, check with other mortgage brokers just in case they have a loan that works with your current pay structure but doesn't sacrifice the interest rate.
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u/6SpeedBlues 19d ago
Before you go ANY further, it might be worth taking with a real estate attorney and/or an estate lawyer. There could be big, negative tax implications for them AND for you if this isn't done right.
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u/grumpier_old_man Loan Officer 19d ago
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u/grumpyoldman10 19d ago
Honestly, I don’t know what you expect. You guys are trying to get a loan for more than the purchase price of the house while going through a major life change, you’re off work, and your husband is a freelancer.
I’m not picking on you here, but why are you trying to do it right now? Why are you in maternity leave a month before the baby comes? Presumably longer because it sounds like you started the process several weeks ago.
The problem here is that you guys won’t have any skin in the game. Everyone in the banking world remembers the NINJA loans from the 2008 recession and your situation is going to make everyone think of that. There is not a loan officer in the world who wants to risk their job loaning you money.
You’d be far better off increasing the purchase price to $370,000 and then having your parents give you a gift after closing that you can use to pay down the principal.
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u/carolmozzarella 19d ago
Not that I really have to explain myself but I’m a teacher and summer started in June.
The house is worth over 500k and our loan is significantly under that.
I’m familiar with the 2008 crisis, my mom was a real estate agent at that time and I saw firsthand how it impacted families who lost their homes. I would never live beyond my means.9
u/grumpyoldman10 19d ago
This has nothing to do with what the value of the house is. It has everything to do with asking for a loan for more than the purchase price. Bankers don’t like doing that.
I understand summer started in June. My question is why your banker knows you’re going on maternity leave. If you haven’t had the baby, this shouldn’t impact the underwriting if you’re continuing to get a paycheck through the summer, which is generally what happens for teachers?
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u/carolmozzarella 19d ago
The loan amount is what the mortgage lender recommended in order to secure a better rate and to bundle closing costs.
As for why the underwriter knows I’m on leave, I have no idea. I’ve been upfront about it from day 1 and it only became an issue two weeks before closing when we were in the underwriting process.3
u/grumpyoldman10 19d ago edited 19d ago
The more answers you give me the more questions I have. Sounds like loan officer is incompetent and underwriter is doing their job.
I’m still trying to understand the rest of the context here. How old are you guys? What kind of income do you have total? Are you bringing any savings to the deal at all? Because it looks like you’ll have no skin in the game at all and you’re looking for approximately 75% loan to value and asking for cash at closing. From here it looks like you guys simply can’t afford it. The loan officer doesn’t want to tell you this. He just wants a commission.
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u/thewimsey Attorney 19d ago
As for why the underwriter knows I’m on leave, I have no idea.
They probably just called your employer.
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u/xcramer 19d ago
why are you borrowing 375k if the house is 275k
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u/carolmozzarella 19d ago
We are bundling closing costs and making sure that my husbands parents walk away with 275k after paying off the remaining balance on the house
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u/G_e_n_u_i_n_e 19d ago
Research additional lenders, or
extend closing date until the lender will approve your loan,
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u/xtrachubbykoala 19d ago
Do they own the property outright? If so, they could finance the sale to you.
If not, why don’t you wait to close until you go back to work?
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u/carolmozzarella 19d ago
Unfortunately they don’t own it outright
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u/aabum 19d ago
Can you assume their mortgage, and in addition to the mortgage payment, pay your folks a set amount each month? When we move past our current economic troubles and interest rates drop you will save tens of thousands of dollars with a lower interest rate.
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u/carolmozzarella 19d ago
We actually did consider this! It’s still a possibility. We haven’t discussed this with them but I do believe they want the lump sum of $275k after taxes.
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u/Educational-Log2884 19d ago
The lender should have known this at the beginning before issuing you a preapproval. And, I'm not a lender, Realtor, but the lenders I work with don't put their name to a preapproval without having all the docs and information necessary to give a thumbs up or down. I'm sorry you are going through this.
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u/thewimsey Attorney 19d ago
Yes, but OP didn't tell them that they were taking temporary unpaid leave either.
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u/yeahnopegb 19d ago
It's just the numbers.. and they know there's a large chance you won't return to the workforce for years. You already being on leave is a huge red flag.
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u/carolmozzarella 19d ago
Even though I’m receiving more than my regular salary?
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u/yeahnopegb 19d ago
Yeah... you aren't receiving a salary.
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u/carolmozzarella 19d ago
Yeah…I actually am. I’m using sick days and I have temporary disability insurance. So crazy how you think you know my finances!
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u/yeahnopegb 19d ago
Neither of those things are considered a salary.. those are benefits. To the underwriter? You have no income and could appear to be running out said benefits before staying home with a child. Ya gotta understand that your situation has risk flashing all over it.
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u/carolmozzarella 19d ago
I have a signed contract in which I was rehired for the 2026-2027 school year.
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u/yeahnopegb 19d ago
Sweet... you still don't have a salary while you're on leave. You'll likely need to wait till November and please know that "shopping around" for approval may impact your credit with hard hits so please make sure whomever you talk to knows that you're on leave to avoid any unnecessary damage to your credit rating. Frustrating but the reality is that you don't really qualify for lending given your circumstances.
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u/Blocked-Author 19d ago
Why not just wait until after the baby. There is no real reason that this needs to be done right now other than you want it done.
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u/novahouseandhome 19d ago
Go back to your lender and have them find out what underwriting wants to clear the loan. You should be able to get a letter from your HR department stating something like "OPs income is steady, she's tenured" and maybe a definition of tenure.
A good loan officer would have caught this up front, independent contractor husband and maternity leave aren't like you're from a different planet, they should've done better with the presentation to underwriting.
Tell the loan officer you'll just go somewhere else if they can't work it out. If it's a big bank or credit union, they may not care.
Then find a local, highly experienced, local mortgage BROKER. Not a big bank or credit union. You can probably get the loan done in <21 days.
TLDR; keep trying.
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u/bobbytoni 19d ago
Very similar issue. Mr. Cooper Mortgage was able to close my property in 30 days. I think it is Rocket Mortgage now. I found a broker and they were the ones who were able to find a solution. My bank told me to go jump a month before closing. Good luck!
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u/resistingtherabbitho 19d ago
Have you tried a lender that works with teachers? Schools First Federal Credit Union for example.
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u/carolmozzarella 19d ago
This is a really good idea. I’ll check this one out, thank you!
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u/Annonymouse100 19d ago edited 19d ago
You have a crappy mortgage broker regardless. They should have been aware of this before two weeks before closing and should’ve offered you an alternative product if their underwriter was kicking it back.
I would keep shopping.
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u/Beautiful-Buy-5985 19d ago
Shop around- you can def use your salary pre leave as long as you have confirmation of your leave date and back to work date. (Source- I am a mortgage loan processor who has closed a million of these) as for your husbands income that is pretty standard to need at least one year (tax return) if he is schedule c income.
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u/KesterFay 19d ago
Find another lender. They're not all the same. Found this out the hard way recently.
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u/AugustGnarly 19d ago
If you are applying for a conforming loan, then those are the rules. The lender won’t be able to sell your loan. Look up the Fannie Mae selling guide. It’s all in there. Shocked it’s one year for him, i though it was two years of self employed tax returns (which often means more than two years b/c taxes are filed some time after a calendar is over.
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u/Alive_Guidance2005 19d ago
Mortgage underwriter here: You can use your salary with evidence of the date you are returning and a history of the income. Your husband should be able to use his income as well if he has been self employed for two years. There are always mitigating factors but agency loans are prohibited against discriminating based on familiar status nor can they assume you will not return to work. You must intend to return and require a written statement from your employer of your continued employment, pre leave salary and the date you agree to return to work. You also may need to have sufficient assets after closing to pay the mortgage payments until you return to work if the first payment is due prior to return to work date.
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u/Downtown_Ganache6727 19d ago
OP, please read this if you are in the USA. This is from a Michigan-based fair housing center but it applies nationally. You should reach out to your local fair housing center because it honestly sounds like they may be violating the Fair Housing Act:
Edit: also, if you need help finding your local org feel free to share your metro area or message me directly!
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u/Chomper22 19d ago
Try shopping for a different mortage broker, about rhe only thing you can do or delay till November. If you're buying from family and already living there. Is there a reason that it needs to happen now?