First-time home buyer, buying from parent

**Broken Arrow** · 07-22-2006, 06:27 PM

Re: First-time home buyer, buying from parent

Wow, that's actually quite a handful of important tasks to manage. However, I would try to handle it in the following order:

1. Focus on finding a part time job.

2. Pay off all outstanding debts and fix your credit.

3. Save up 43k. Buy the house with cash up front.

It wouldn't be easy, but I think it's quite doable. It will also save you a lot more money in the long run.

**Tree0164** · 07-23-2006, 04:03 AM

Re: First-time home buyer, buying from parent

That sounds like a great deal. I am not sure of tax consequences for your mother because it may seem like a gift to the IRS.

I would focus on getting your credit fixed up, pay off the credit cards and pay your mother's mortgage payment while you are stil there.

How much credit card debt do you have?

**chrislyn317** · 07-23-2006, 07:50 AM

Re: First-time home buyer, buying from parent

I guess I'm going to have to find out what the IRS issues will be, My mother has been out of work since January and will probably be retiring rather then returning to work. So I currently pay the mortgage....... should I pay it a certain way to prove I've been doing so? Will that make a difference to the IRS?

we have about 6000 in CC debt, we also owe about 3000 on our car. The trade in value is only 3500 so were stuck with a payment (and full coverage insurance

) on it for now.

Paying off most of our debt is possible in about a year, with our tax refund in Febuary and being money savvy too.

My real question is, what tips can you give me on buying it (when I do so)? Are there any special first-time programs you have heard about that I might qualify for? I Live in Philadelphia Pa (if that helps).

**sweeps** · 07-23-2006, 08:47 AM

Re: First-time home buyer, buying from parent

Originally posted by Tree0164

That sounds like a great deal. I am not sure of tax consequences for your mother because it may seem like a gift to the IRS.

True. If your mother sells you the house for less than market value, then that difference is a gift. However, the annual exclusion from the gift tax is $12,000 this year. So if your mother is selling you and your husband the house, you could exclude $24,000. If your mother and another person (your father, step-father, etc.) both own the house, then you could effectively exclude $48,000. But there are always exceptions, loopholes and what not, so be sure to consult a real estate attorney.

**sweeps** · 07-23-2006, 08:59 AM

Re: First-time home buyer, buying from parent

To your original question. Do you or your husband have any money in a 401k, IRA or similar retirement plan? You should be able to withdraw some money for the purpose of buying your first home.

Also here is the Philadelphia OHCD. There is a link for 1st time homebuyer programs.

**Ima saver** · 07-23-2006, 09:08 AM

Re: First-time home buyer, buying from parent

I would talk to the bank. If you have an income of $45,000 that should be plenty to take on a 43K mortgage. Have the house appraised to see what they would loan you. I would start saving and paying down debt as much as possible!

**chrislyn317** · 07-23-2006, 09:09 AM

Re: First-time home buyer, buying from parent

Originally posted by Sweepsplayer

True. If your mother sells you the house for less than market value, then that difference is a gift. However, the annual exclusion from the gift tax is $12,000 this year. So if your mother is selling you and your husband the house, you could exclude $24,000. If your mother and another person (your father, step-father, etc.) both own the house, then you could effectively exclude $48,000. But there are always exceptions, loopholes and what not, so be sure to consult a real estate attorney.

To your original question. Do you or your husband have any money in a 401k, IRA or similar retirement plan? You should be able to withdraw some money for the purpose of buying your first home.

Also here is the Philadelphia OHCD. There is a link for 1st time homebuyer programs.

Thanks for the info, I'm going to look into it and see what loopholes I can find.

My husband has a 401k but has only just started making a contribution to it, so it will be a while before theres a chance of withdrawing from it.

Thanks for that website, it's great!! Thanks for all your help too.

**RJB1180** · 07-23-2006, 09:40 AM

Re: First-time home buyer, buying from parent

I disagree with others here. Buy the house now, many banks have 1st time/ low income mortagges at great rates. Try Hudson City savings bank.

Have a realtor provide you with a comp. analyst to find out the estimated value. Then use the equity above the selling price as a gift from your mother for the 20% dnpymt to avoid PMI.

ex.

Value = 60k
Mortage = 43 k 72% ltv
Gift of Equity = 17k 28% or
Selling Price = 53,750 for a 10,750 gift of 20% equity to avoid PMI.

Also any gift above the yearly exemption is still exempt upto 1 Million dollars for a lifetime, just need to file form with taxes.

My wife and I bought our house this way and it worked great, I would also suggest using a lawyer, as state to state rules may vary

**chrislyn317** · 07-23-2006, 10:00 AM

Re: First-time home buyer, buying from parent

RJB1180 --- Thanks for your advise, thats what i'd like to do as my mother isn't in the best of health and I've been living in her property paying the mortgage, utilities, and such (she lives with a boyfriend and has for a while). I would hate for my mother's health to deteriorate to the point where she wouldn't be able to voice her wishes for me to buy the property. I am 1 of 5 kids and even though I don't believe that any of my siblings would protest me taking it over, I've heard of money making the most unselfish people change. So I want to legally own it as soon as possible since right now there is no objections. Don't get me wrong I'm not selfish and have offered to buy it for more than the remainder of the mortgage, with my mother telling me "I just want you to pay whats left". I also hope my mother is around for many years but with her health problems in the past nobody can predict the future. I'll take your advice to a real estate attorney and see how best to handle this. Thank You

sorry for the long post

**34saving** · 07-23-2006, 10:24 AM

Re: First-time home buyer, buying from parent

1) Check the assessed value of the house. That will do something to inform you about the tax consequences.

2) You might want to consider a contract for deed. It's a legal doc. so the siblings shouldn't have a problem with it. You could avoid 99% of closing costs and your credit rating wouldn't matter/affect your interest rate. State laws vary A LOT on CFDs, but it might be something to consider . . .

**joesixpack** · 07-24-2006, 05:28 PM

Re: First-time home buyer, buying from parent

Considering that you are already paying her mortgage, check with a bank or broker and try to buy the house now. Might as well at least be paying your own mortgage and getting the tax benefit. Assuming the payment is similar, you still focus on paying things off the same way otherwise.

**Bluezy** · 07-26-2006, 01:25 AM

Re: First-time home buyer, buying from parent

Originally posted by chrislyn317

.... I am 1 of 5 kids and even though I don't believe that any of my siblings would protest me taking it over, I've heard of money making the most unselfish people change....I'll take your advice to a real estate attorney.

This is a wise action. When I worked in this area of law you would not believe the number of cases in similar scenario's that ended up in undue influence litigation, etc. Sad thing is that hard feelings from other sibilings that had beginnings during childhood (example: sister A got the doll I wanted in the Christmas of 1984 and I didn't) also surface and cause havoc.

Good luck to you and all the best for the future!

First-time home buyer, buying from parent