I'm in a situation and need some advice. A friend of mine is in the middle of Chapter 11. He asked me to help to buy his house and in a few months sell back to him, so he can force the bank to lower the principle mortgage currently on that house.
He said he will pay for the down payment and put at least 6 months of payment in my escrow account, so I do not need to pay for anything regarding this deal. All he needs from me is to put my name on the mortgage and he'll "rent" from me. He showed me the contract that he is selling a property under his wife's name and the money would come in a few months which is enough to pay for this mortgage.
People may wonder, why should I do this for my friend. The only tempting reason is because he'll pay me extra $500/mo for the duration of the mortgage until I sell back to him and in the end, he'll pay me some chunk of money as appreciation. Still, this is the first time I'm applying for a mortgage and I was originally looking to buy my first house soon, so I don't know what to do now...
UPDATE: Thanks for all the comments, here are few more details
- The price for this property will be at market value around $300K. His original mortgage is around $60K range.
- My friend would pay for all the costs involved in this deal.
- This is my feeling, but I felt I don't know him much. He said he used to be a banker, but that's all I know about his business. I'm not sure what I'm getting into or who I'm dealing with...
- I also felt the bank went to bankruptcy is little suspicious, any place I can look up for sure? For example, if I learn the bank's name, any place I can look for if the bank is filing bankruptcy?
- My friend is filing Chapter 11, but this house is his primary residence (For as long as I know him, he's always live there). He said he cannot "fix" this mortgage using the same methods as with rest of his investment properties.
- As I said, he will deposit a few months of payments to my escort account prior to close the transaction, do I still need to worry he runs away? I was thinking worse case, I just sell this property and since I'm not involved in down payment and fees, etc. If I'm sure the mortgage is within the market value, I'm in good position to not lose any money. Thought?
- As why not just have his wife "buy" the house, this is slightly complicated. Because his wife is in the process of getting her green card (ETA in 2 months), so she cannot apply for a mortgage now and the majority of money will come in Oct. Nov. time frame.
- I also thought about tax related trouble. I think it needs to be written down bwetween my friend and I for him to pay for any potential income tax related to this "rent".