[renelew]

Hello,

I just acquired a home loan. Because my income to debt ratio was high the mortgage broker suggested that my mother, who is a Sr on social secuirty, be added as a co-borrower. I questioned whether doing so would have an adverse affect on her eligibility for social security. My realtor told me not to worry because after closing we could just use a Quit/Quick Claim to have her transfer the property entirely over to me.

Maybe too late, I just searched the internet and found some possible problems. I saw information that suggested that using a quit claim might cause the bank to call for full payment on the loan.

Can one co-borrower use a quit claim to transfer total interest to the other buyer? What else should I know about this?

Thanks!

[DoulaLC]

I can't speak for the legalities where you are... from personal experience, when I went through a divorce, my ex filed a quit claim so that the house would then be in my name only. I was not expected to pay the loan in full. Payments went on as usual.

[Fr_Chuck]

You will need to check with the bank, divorce is a special thing, where a court has ordered something,

But the biggest difference here is that one party is being taken off the deed, not adding someone to it. Adding someone too the deed makes it a more "iffy" thing, since a bank if it forecloses, has to foreclose against a owner who does not owe them any money.

But first a mortgage broker is not who should have been asked, the attorney you used at closing ( please tell me you used an attorney) is the one you needed to ask.

But actually yes you should be able to take her off, but she will understand that if you fail to pay, or pay late, she is still liable for all the payments and her credit will be ruined if you don't pay properly.

So my best guess is you can without a problem, but you should get the mortgage companies permission before doing anything.

Now with that said, you will have other tax issues, since now she owns 1/2 of the value of the home equity ( if any) so when she signs it over to you, without you paying her for it, it is a gift and has tax issues there.

[renelew]

Doug and Frank,

Thanks for your responses. Our major concern is just getting her name off the deed so that her social security and other benefits as a Sr. on fixed income are not adversely affected. Yes, I understand that any irresponsibility on my part regarding lack of payment would affect her credit.

I was more concerned about the possibility that the bank might call in the loan in full. I read something on line to that effect. That of course, would be an impossible situation for me.

Ren'e

[ScottGem]

Check the promissory note. Most mortgages have a Due on Sale clause. This allows the lender to call the loan in full when there is a change of ownership. If your mom remains on the note as a co-borrower, the lender will probably not invoke that clause if she transfers the ownership to you. So I would check with the lender first.

[renelew]

Hi Scott,

Thanks for your response. I'm not sure I understand. She is currently shown as a co-borrower. Are you saying that she could both remain as a co-borrower (like a co-signer?) and take her name off the deed? I feel like I'm missing something.

Thanks again,
Ren'e

[ScottGem]

That's exactly what I'm saying. Look at this from the lender's perspective. The lender didn't feel you were credit worthy enough to qualify for the loan so they required a co-signer. They don't really care if the co-signer owns the property, just that she's responsible for payment.

Its different if you are adding someone to the deed. Then the mortgagee's interest in the home is changed. So in this case, the lender may be willing to allow the property to be placed solely in your name as long as mom remains a co-signor on the loan.

[renelew]

Hi Scott,

Thanks for the clarification. I thought that was your point, but wanted to be certain.

Ren'e

[JudyKayTee]

I can't speak for the legalities where you are.......from personal experience, when I went through a divorce, my ex filed a quit claim so that the house would then be in my name only. I was not expected to pay the loan in full. Payments went on as usual.

This must vary by State - when I got divorced (NYS) and was awarded the house the mortgage company would not allow a quit claim. I could either refinance or leave it as it was (in joint names).

My ex didn't care so I left it in joint names - but he COULD have forced me to take his name off and refinance.

As I said - must vary by State or lending institution.

[pacific nw]

Washington State (yes, the OTHER Washington) (if you look on the map it is waaaayyyyy up there in the left corner) is a "community property state" Lenders don't care if someone is Quit Claimed off property after closing. Title Of Property and Deed of Trust are two entirely different things. Whomever signed the Deed of Trust (Mortgage) (as in husband and wife, etc) is still responsible regardless if they are "On Title" even if they Quit Claimed off. In Washington, anybody On Title, OR a Spouse of anybody On Title, whether they are on the loan or not, has to sign the purchase and sale agreement and Warranty Deed to sell, UNLESS they have Quit Claimed off, it only takes one of them to buy, (provided they qualify for the financing, etc). Confusing? Yes. It's a little like when Bugs Bunny winds up in the Grand Canyon and Says "I should have taken a left in Albuquerque".

It varies a lot state by state, you need to find out what your state laws are for this one.

Lenders will only know if Title has changed if you tell them or if you take out new Homeowner's Insurance in a different name. A Quit Claim Deed does neither of these.

Incidentally, a Quit Claim Deed only tells you the person has no interest in the property. I will give you a Quit Claim Deed to the Empire State Building and it is perfectly legit. A Warranty Deed says you WARRANT that you have the right to sell the property and can be SUED if there is a problem.

Do you see the difference? A Quit Claim Deed is fine for most applications like yours, but not all.

Talk to a Title Company (As in look one up in the Yellow Pages) and ask them what they will accept. They may even give you a copy to fill out if you use them for your transaction.

I am not a rocket scientist nor do I play one on TV. The value of the advice is what you paid for it or maybe a little less.