Michael on May 22nd, 2009
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It’s Friday, so it’s time for this week’s reader-submitted Q & A. If you’d like to submit a question, click here for more information or simply email a question. The questions about the first time home buyer tax credit keep coming so this week we’re including two on the topic.  If you have your own, feel free to comment at the 2009 First Time Home Buyer Tax Credit.

I am a first time buyer BUT I was married in 2005 and lived with my husband for 3 months; after 3 months I moved back with my mother and have lived there every since which has been almost 4 years now.  My estranged husband owned his house prior to the marriage and I am not on the loan or the deed and he has an FHA loan.  I have been approved for a FHA loan can I take the $8,000 tax credit if he signs away his rights.  We have no intentions on getting back together.

–Requested Anonymity

I have clients who live in another state and would like to purchase a home (in Colorado) for their son while he attends college here.  If they purchase the home in son’s name, would he be able to take advantage of the First Time Homebuyers Credit?  The home could either be a conventional loan or cash purchase.  Your thoughts on the best way to go?

–Carly K., Colorado

Short Answers: A problem and no problem.

More Detailed Explanations: Anonymous hasn’t owned a home in four years.  Since the definition of a first time home buyer is anyone who hasn’t owned a home in the last three years, she’s okay on that front. However, she can’t be married to someone who doesn’t qualify.  She appears to still be married to her husbdand and, since her husband is a homeowner, she is disqualified.  If she were divorced, the answer could be different.

Carly’s clients are considering purchasing a home for their son who has never been a homeowner before and who, we can safely assume, is well underneath the income limits described here. The source of financing is irrelevant (cash vs. mortgage) so long as it is the son who will own the home.  Keep in mind that there may be gift tax implications if the parents are just giving him a huge amount of cash to assist with the down payment. (If less than $26,000, there’s no problem).

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2 Comments to “Friday Q & A: First Time Home Buyer Tax Credit”

  1. Jonathan S says:

    Consider me your typical renter looking to make the leap to a home or condo ownership. I found a dream townhome, for sale by a private party – they are open to consider a lease to own or other financing options. My question is it possible to start a lease to own this year and be eligible to the credit?

    Or I know you mentioned elsewhere a transfer of title is required, is there a way to structure a lease-to-own property to transfer the title to be eligible? Or perhaps some kind of mortgage arrangement with the existing owners? I’m curious if I have any options here or am plum out of luck and stuck renting another year.

    Thanks,
    -Jon

  2. Michael says:

    @Jon: Nothing matters but the transfer of the title. Take title before 12/1 get credit. Don’t and get nothing. That’s what you have to negotiate around. It will depend how flexible you and the owner can be with each other to get it done. For what it’s worth, if this is too much of a stretch (which it sounds like it might be), don’t get your dream townhome first – get one you can comfortably afford and avoid all these complexities. That’s truly your best option. You’ll sleep better even if it isn’t the home of your dreams.

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