What is the best way to buy this house from my father?

My husband and I are selling our house on a short sale. It has been on the market for a year now, and we feel we have no other choice. We moved out of state(relocated to nearer my family and for job). Now we're renting a house from my parents (was my grandparents'). They hold the deed to the house, with no mortgage on IT, but they took out a mortgage on their current home (where THEY live) to pay the small amount they owed on this house along with some money they gifted us and some money they loaned us. My father would like to sell us the house, and we want to buy it. He has complained about having a mortgage on his house "after all these years" which I fully understand.However, on the other hand, he offered to finance it for us if we'd buy it, because with the short sale and a year of keeping up two houses, our credit scores are low. I want to do what's best for him. The mortgage he's holding is about $100,000 at 4.5%, and we owe them $20,000 more. The house is worth$135,000.Advice?

I'm also trying to figure out if we'll be able to get financing to buy this house. My husband makes a great salary with the new job, but as I said, there's the low credit along with the short sale on our credit reports. Should we try to get our own financing, at a higher rate than what my father has, or do we buy from him as the "bank" and pay him, then he pays his mortgage?? That obviously doesn't rid him of the mortgage, although it helps him on his taxes, right? Would another option be for him to co-sign a mortgage for us to help out getting a better rate? My husband is self-employed and I am employed outside the home, as well. I am confused.

I agree with AlterFemego...

Since the parents own the home free & clear, a owner financing is a perfect solution & a win-win for all of you.

If their HELOC on their primary residence is $100,000 at 4.5%, their payment should be just over $500 a month.

Structure your loan with them for an attractive interest rate & make sure your payment will be over than what they pay each month. The more, the better. $135,000 at 7% interest with a 30 year am would be $898.16 a month. In this scenario, the parents would be making just under $400 each month.

There can be a cash out in "x" years where you will then need to cash out the owner financing with a bank loan. Make sure to give yourselves ample time to rebuild your credit. A year or 2 isn't going to be long enough.

You still get to write off the mortgage interest & parents are only taxed on the interest & whatever portion of the principal is capital gain, if any.

After reading through all the emotional stuff, I got to the important stuff - the numbers. The best way to buy this house would be to buy it with the financing intact - it is called buying a house "subject to" the existing financing. A knowledgeable title company can set this up for you. Your father can also sell you this house with a wrap around mortgage. He has some room to maneuver since there is equity, and he has a great interest rate.

Just keep it business - focus on the numbers. This is a numbers transaction - and completely separate from the personal relationships.

Have a real estate attorney draw up a contract. It won't be any different from any other owner finance except that the seller is a relative.

I know it's family but.... Let's keep things on a good basis. Hire an attorney to draw up the necessary paperwork for your dad to sell you the house on a contract for deed. Make sure to record the deed after wards. Because it's family, let's keep the cost at a minimum, don't have a Realtor help you, although they could. It would just cost you more money. I would imagine you could have the deal done for under $1,000. But using an attorney is so everyone is put on notice that this is a business transaction and should be treated as one.

You are very fortunate to have family that can and will help you out like this. Always be there for them no matter what.
HUGS FROM MINNESOTA!