IRA Investing

[dfeucht]

I have never seen this in any financial forums before and wanted high level background that the folks at this forum might know before I pursue further.

I am looking to purchase a home for me to live in the next 6 months. It is my expectation that I will put 10-15% down to keep some of my cash liquid for emergencies and other items. As such I am a fan of going with a 80% mortgage with a primary lender and borrowing 5-10% on a secondary loan at a slightly higher rate to avoid PMI.

My parents have a lot of their IRA portfolio in conservative funds (CDs/Savings, etc.) that have lost a lot of return in the last year. My question is there a way for them to use those funds as a secondary lender instead of another mortgage company. My guess is this is not possible, but quick searches for me haven't yielded much in terms of this scenario. I know they can invest in real estate they don't live in, but I don't know if the paperwork would be such a nightmare that it isn't worth it. I do know they could earn a better rate with a good credit risk in me and I could get a better rate than a bank for this type of mortgage.

Any thoughts? Thanks in advance.

[sweeps]

It sounds like they would not be making a real estate investment with their IRA, but they would be lending you money from their IRA. That is not allowed.

They could buy a house with a self-directed IRA and rent it out, but according to this article from Bankrate, you're not allowed to rent it out to yourself, your spouse, your ascendants or your descendants. So that wouldn't work either for your situation.

[dfeucht]

Exactly what i needed. Thanks for the quick reply.