Hey guys,
We're looking into buying a house from a family member and I have a couple questions I thought Lost fans could answer. Since we're buying the house (maybe) from a family member do we need to worry about closing costs and all that? Or are my only expenses going to be to the bank- for a down payment, monthly mortgage bills, etc?

Thanks a lot!

Hi, and congratulations on this big step!

Since you're buying from a family member you'll obviously avoid real estate broker fees, which can run 5-7% or so.

It sounds like you're going through a bank or traditional financing, so you would be responsible for closing costs. These include appraisal, credit report, underwriting, title search, flood certification, etc... Here is a list of what to expect, geared towards your area: (good news- it looks like MO runs a little below national average, but should still be in the range of $2600.00)
http://www.bankrate.com/brm/news/mortgages/ccmissouri.asp

First: get a good, reputable lender to assist you. They can help navigate through the programs (below) which may be available to you.

I checked your area - there is a "first time homeowner" program which could benefit you by providing a lower rate of interest, closing cost assistance, among other things:
http://www.mhdc.com/homes/index.htm

Ask your lender about Rural Development, a USDA program which provides up to 100% financing if the house falls into an area they consider rural. (Conventional down payment is typically 20% - this program could eliminate that.)
http://www.rurdev.usda.gov/rhs/common/indiv_intro.htm

If you're a veteran, the VA has a program which could assist you:
http://www.homeloans.va.gov/veteran.htm

Also you may qualify for FHA financing. http://www.fha.gov/

You can "buy down" your rate, by paying points in advance, usually due at closing (1 point = 1% of the loan amount). You'd usually want to do this only if you have a lot of money up front and wish to save interest over the life of the loan; it's not at all a requirement.

If for some reason you don't qualify for any programs, and must come up with the 20% down payment requirement, then private mortgage insurance could assist you by reducing the down payment requirement, sometimes to 5% or less. You pay a bit each month for part of the life of the loan (ask your lender)

So as you can see, there are a lot of state and government programs there to help defray costs and save you money! Each one has their own requirements, and may add a little bit of time to the financing process. But have patience. It will pay off in the end and could save a huge amount of money over the life of the loan.

Good luck and let me know if I can help you with anything...:)

Hey guys,
We're looking into buying a house from a family member and I have a couple questions I thought Lost fans could answer. Since we're buying the house (maybe) from a family member do we need to worry about closing costs and all that? Or are my only expenses going to be to the bank- for a down payment, monthly mortgage bills, etc?

Thanks a lot!

First off, closing costs have nothing to do with whether or not you are going through a real estate office. They have to do with a mortgage company, so if you are getting a mortgage to pay for the property, yes, in fact you will have closing costs. Does your family member have the property in the hands of a real estate agency right now? Because if they do, as the seller, they will be obligated to pay the brokerage fees if they have signed on with them to sell their house. You as the buyer do not have to worry about those expenses either way, they are strictly seller related. If you are financing it, you will have to do all of those things that involve down payments, closing costs etc, UNLESS you are planning on paying your family member cash, and nothing is being financed. In that case, there is just some paperwork that needs to be filed in order to transfer the deed from them to you. If you want details feel free to ask specific questions and I can help you with them.


Since you're buying from a family member you'll obviously avoid real estate broker fees, which can run 5-7% or so.
FYI Buyers do not pay broker fees, sellers do, and they are all negotiable.

First off, closing costs have nothing to do with whether or not you are going through a real estate office. They have to do with a mortgage company, so if you are getting a mortgage to pay for the property, yes, in fact you will have closing costs

I think the first line of my post was misunderstood. It was meant as in "Good news - you're buying directly from a family member so you won't have to pay a realtor commission".

Thanks for all your help guys! The family member does not have a real estate agency representing them right now- he hasn't put it up on the market yet. thank you for all the links, I really appreciate it. We aren't paying cash- we will indeed have to go through a bank for a home loan.

First off, closing costs have nothing to do with whether or not you are going through a real estate office. They have to do with a mortgage company, so if you are getting a mortgage to pay for the property, yes, in fact you will have closing costs. Does your family member have the property in the hands of a real estate agency right now? Because if they do, as the seller, they will be obligated to pay the brokerage fees if they have signed on with them to sell their house. You as the buyer do not have to worry about those expenses either way, they are strictly seller related. If you are financing it, you will have to do all of those things that involve down payments, closing costs etc, UNLESS you are planning on paying your family member cash, and nothing is being financed. In that case, there is just some paperwork that needs to be filed in order to transfer the deed from them to you. If you want details feel free to ask specific questions and I can help you with them.



FYI Buyers do not pay broker fees, sellers do, and they are all negotiable.

Then thats good news for you. Just make sure you get the right paperwork that needs to be filed in your state and you should be fine. The laws are different from state to state, I am in PA, so you should check with a Buy Owner website to see if you can figure out which papers you'll need.

Thanks for all your help guys! The family member does not have a real estate agency representing them right now- he hasn't put it up on the market yet. thank you for all the links, I really appreciate it. We aren't paying cash- we will indeed have to go through a bank for a home loan.

You're welcome ForceOfHabit Hopefully you'll qualify for some of the programs available to save you some $$$... Your lender might be able to help you with the forms you need, such as a Purchase & Sale agreement. Best of luck with the home purchase!

Thanks for all your help guys! The family member does not have a real estate agency representing them right now- he hasn't put it up on the market yet. thank you for all the links, I really appreciate it. We aren't paying cash- we will indeed have to go through a bank for a home loan.

ForceOfHabit, congrats on buying a home! It is STILL the American dream.

Might I add to what others have said...be sure to have a real estate attorney represent you at closing. Even though it is family, do not scrimp on this step. It is bad enough to have problems after closing with a seller, but when the seller is family, it can turn into a never ending nightmare. This is likely the most expensive purchase you have ever made, so go in with eyes wide open.

If you do not have an attorney, ask your mortgage lender or a friend to recommend one.

Good luck :)

Good tip PosseGal. And if I could add one other thing - if it's not listed on the Purchase & Sale agreement, it's not guaranteed to come with the house. Best to go over, in detail, every item that comes with the sale and write it in the agreement. (for instance, lighting fixtures, appliances, etc,,)

I hope it goes better than my house purchase (UK) which is still going on ...and on....and on....and...on.

Yes, hello nice bank people and lawyers, please charge me £1200 so far (which I can, of course, lose if it all falls through) for draw-down fees, surveys and legal costs and then mess up all my documents, never be in when I need to speak to you, and please, if you could, don't actually do any work towards completing my purchase in a timely manner. That would just be silly, after all :wallbash: :mad2:

I had my offer accepted in March. Ye gods.

One thing I'd like to add, when purchasing from a family member, be sure you can substantiate the price as reasonably in line with market value (market analysis, etc.) The IRS wants to make sure you are not using the opportunity from buyer to seller, or seller to buyer to get around gift taxes that might otherwise be owed - like if you wanted to "sell" a $100,000 home for $10,000 or something, which people who are not related are free to do, as far as I know (I do not work for the IRS - just had a family experience with this issue). If the seller wants to take that kind of loss, so be it, but between family, it is not so. Not a big deal, just have to cover all your bases with IRS. Gotta keep Uncle Sam happy. :flower: Probably won't be an issue for you - just have all your documents handy when filing your taxes in case there is ever a question. Good luck on your home purchase!