Question about tax credit for first time homebuyer

[badass88gt]

I have a question, my fiance qualifies for the $8000 first time home buyer tax credit. Is there any reason we can't take out a loan for the down payment on a house, pay a little bit of interest and pay the loan off when she gets the tax credit on her return? Is that legal?

http://www.houselogic.com/articles/homebuyer-tax-credit-what-you-need-know/

[wrath]

It's legal, but to the mortgage company it just looks like another loan. So the trick would be to borrow $8k from a relative, have it sit in your bank account for a couple months (mortgage company wants to know where your money came from), buy a house before you get married (assuming you owned one before, once you get married she's disqualified), pay back the relative with a couple hundred bucks over $8k, and be happy.

[badass88gt]

The wording says "You’re a first-time homebuyer if you or your spouse haven’t owned a home for the three years before your purchase." so getting married shouldnt have any effect of it?

[wrath]

The wording says "You’re a first-time homebuyer if you or your spouse haven’t owned a home for the three years before your purchase." so getting married shouldnt have any effect of it?

Correct, but let's say you owned a home (or more appropriately, claimed a principal residence exemption) then once you are married it disqualifies both you and your spouse, whether or not your spouse has owned a home.

So, what I'm saying is that if you claimed a principal residence exemption in the last three tax years then once you are married your new spouse can not claim the $8k incentive. If this is the case, I recommend buying before you get married.

[badass88gt]

I think I am following you. We have been renting for 5 years, so that doesnt have anything on this then, correct?

[Russ Jerome]

WI is one of the states that will not allow you to borrow against the credit, other states allow you to walk into H&R block and do just that.

[PureSound15]

Well, you can borrow against the credit, but it would be through a short term ARM through a financial.

A person who owns a home now can still get a $6500 credit for purchasing a home.

[badass88gt]

So there is nothing to stop me from receiving a gift from my parents to use as a down payment, then I give them the tax refund because I love them and want them to have it. I could even take out a personal loan just to have extra money and use that for the down payment?

[jbiscuit]

most mortgage companies won't allow you to accept a gift for the down payment, especially for a first time home buyer. They want bank statements showing the money is yours and you came up with it.

[badass88gt]

I would be looking at FHA loans, I wonder what their requirements are, if the money can be gifted. I'm getting married in May, would be a wedding gift.

[jbiscuit]

FHA will allow a gift of money to be used as a downpayment. It will require a signed letter (most likely) stating who its from and for how much as well as the necessary paper trail.

[badass88gt]

Thanks doods.

[wrath]

I think I am following you. We have been renting for 5 years, so that doesnt have anything on this then, correct?

Then either of you is fine to qualify for the first time homebuyer's credit (assuming you don't make oodles of money). You both can't claim it though.

The kicker for married couples is that if either of you have claimed a principal residence exemption (claimed a tax deduction for a primary residence) it exempts you from the credit. So that's why if either of you have claimed the PRE you should buy a house before you get married. There are other restrictions (income, home price, et cetera) but you're probably fine.

A bank wants to know where all of your money came from. So if you show up to closing with an $8k check that didn't match what you had in the bank then they want to know where it came from. The easy way to get around this is to dump the $8k in your checking, money market, et cetera account at least two bank statements ahead of your home purchase. FHA loans are a little more lenient on "gifts" used for home purchases but I know these rules are changing also (as well as how much the seller can put towards closing costs). I'm sorry, I'm kind of rusty on this as I haven't had time to look into housing much in the last fewmonths.

Lastly, for those "repeat home buyers/move up buyers" for the $6.5k tax incentive, BOTH of the married couple must have owned a home for 5 of the past 8 years. It's kind of funny because my wife gets screwed out of the $8k by marrying me and I got screwed out of the $6.5k by marrying her. Oh well, Obama managed to fsck all the people that bought in the boom market.

[badass88gt]

I think only she qualifies because my name was on another mortgage with my exwife last year.

[VroomPshhTsi]

Is there any way to get a free house or condo? All these ads saying "banks are giving away homes!!1!!11" How do I get my free home?

[wrath]

I think only she qualifies because my name was on another mortgage with my exwife last year.

In that case, you need to close on the house before you get married for your wife-to-be to be eligible for it. It's the exact same situation that we were in, except we never got a house. Hopefully you have better luck than us.

[Russ Jerome]

So there is nothing to stop me from receiving a gift from my parents to use as a down payment, then I give them the tax refund because I love them and want them to have it. I could even take out a personal loan just to have extra money and use that for the down payment?


They can loan you the money, has to be a close family member and they will need to have the bank they remove the money from sign the form as well:
http://www.fhaok.com/documents/FHA_Forms/FHA%20Gift%20Letter.PDF
Do not bring up a repayment to your mortgage lender, its against FHA rules to plan on repaying a "gift".

You can not use the credit on paper as collateral for a loan, it is against WI law, ask Mr Doyle. Every mortgage and realestate company (including Shorewest) would love for you to think you can, gets you in the door and shopping.

The FHA sight has a very comprehensive list of rules and regs, most local realestate/mortgage people cant resight 1/2 the rules written in black and white directly from the FHA sight.

[05caddyext]

Just another word of caution about "borrowing" the money from someone. I bought a house last year, closed in September. I amended my 2008 taxes so that I could receive the $8000 quicker. I am still waiting for the check. I got a letter from the IRS last week saying that "I will receive a response by March 6th as to the status of my refund." So if you are thinking you'll get the money back quickly, don't count on it. I did some research on it and it seems that a lot of people are saying the average turn around time has been about 7-9 months before you actually receive a check.

[badass88gt]

Is it legal to take out a 401k loan from myself to use as a downpayment?

[DirtyMax]

DP on a home qualifies as a "hardship" so you can borrow from 401k but if you were to lose your job unexpectedly, they usually require that money back in full ASAP. Otherwise, it then turns into a withdrawal and in that case, bend the hell over cuz the IRS is going to tax you like crazy....

[wrath]

Is it legal to take out a 401k loan from myself to use as a downpayment?

Bad idea because it's painful in the interest department. It's probably cheaper to do a hillbilly IRA rollover (roll over your IRA and borrow from it for up to 60 days before putting it in a new IRA). Borrowing from your retirement is a pretty bad idea in my opinion but it's doable.

You're still better off borrowing the money from a relative for at least two months prior to purchase so it looks like it's your own money.

[pOrk]

How about just save up some money?

[-stew-]

How about just save up some money?


That sounds pretty damn un-American right there...


:D

[badass88gt]

Yeah, except how long does it take to save up $5000 when you have real life bills and kids to support and all that other shit? I'm 36 years old, I wish I could move in with mom and dad to save but I dont think the fiance and kids would like that idea too much, lol.

I do save $20 a week but it will take me until I'm 142 years old to save up enough.

[GOOD LS1]

Maybe I missed this....are you buying soon? The extension for the credit expires on April 30th, 2010.

http://www.businesspundit.com/first-time-home-buyer-tax-credit-extended-to-april-2010-previous-homeowners/

[badass88gt]

Yeah, we were going to get the ball rolling in the next couple of weeks. I need to go talk to the banks.

[05caddyext]

Depending on where you are looking to buy a home, look to see if you qualify for a rural housing loan. I was able to qualify and locked in an interest rate of 5.5% for a 30 year fixed loan. Nice thing about the rural housing loan is that you don't need a down payment.

[animal]

The gift/nongift downpayment thing is kinda lame. There are ways around turning a gift into a non-gift but it really depends if the banks want receipts from you having sold personal posessions. You can come up with a lot of money by "selling off car parts" prior to closing... but not necessarily if they want to see receipts or talk to buyers. Granted it's not like they're going to go look if those $800 tires are actually IN john doe's garage now that you sold them. Alot of that whole deal is how you sell the story. You can ask without raising suspicion if you just say you have a lot of posessions you can sell relatively quickly for downpayment money and you want to know how they want that documented. Most will say you don't have to document it as long as it's in your account at the time of application.

[badass88gt]

Depending on where you are looking to buy a home, look to see if you qualify for a rural housing loan. I was able to qualify and locked in an interest rate of 5.5% for a 30 year fixed loan. Nice thing about the rural housing loan is that you don't need a down payment.


Yeah, this is option #2 that we are pursuing, the USDA Rural Dev. plan is quite appealing, no $ down, no mortgage insurance, etc.

[Russ Jerome]

Do yourself a favor and skip looking at "short sales", only look at foreclosures or open sales.

I was suppose to close at the end Oct, then Nov...Dec and now we are almost done with Jan and the sellers bank wont release the home for my %100 asking offer. Short sales thru big places like Bank of America are getting worse rather than better even with Obamas begging for them to get there head out of there ass.

Short Sales= No sales for months (need to close by end of April)