Posted on: 30th Jan, 2010 01:58 pm
my landlord has recently taken out a home equity loan/refinanced to do some repairs on the home i rent from him. i want to purchase the home from him through owner financing and pay either the mortage + home equity loan, or just the re-fi payment and the house will be mine when this is paid off. i want to make sure to meet the requirements for the 1st time homeowners credit also.....
thanks in advance
thanks in advance
Hi,
In order to qualify for the first time buyer tax credit, you need to purchase the house on or after January 1, 2009 and on or before April 30, 2010. If you go for owner financing, you will not get the full ownership to the property until you meet the terms of the owner financing agreement and pay off the loan. Thus, I don't think you can qualify for the first time buyer tax credit if you buy the house through owner financing.
In order to qualify for the first time buyer tax credit, you need to purchase the house on or after January 1, 2009 and on or before April 30, 2010. If you go for owner financing, you will not get the full ownership to the property until you meet the terms of the owner financing agreement and pay off the loan. Thus, I don't think you can qualify for the first time buyer tax credit if you buy the house through owner financing.
According to irs.gov
Q. Can a taxpayer claim the first-time homebuyer credit if the purchase is pursuant to a seller financing arrangement (for example, a contract for deed, installment land sale contract, or long-term land contract), and the seller retains legal title to secure the taxpayer's payment obligations?
A. If the taxpayer obtains the "benefits and burdens" of ownership of a residence in a seller financing arrangement, then the taxpayer can claim the credit even though the seller retains legal title. Factors that indicate that a taxpayer has the benefits and burdens of ownership include: 1. the right of possession, 2. the right to obtain legal title upon full payment of the purchase price, 3. the right to construct improvements, 4. the obligation to pay property taxes, 5. the risk of loss, 6. the responsibility to insure the property and 7. the duty to maintain the property. (7/2/09)
I guess I need to get a lawyer to draw the necessary paperwork
Q. Can a taxpayer claim the first-time homebuyer credit if the purchase is pursuant to a seller financing arrangement (for example, a contract for deed, installment land sale contract, or long-term land contract), and the seller retains legal title to secure the taxpayer's payment obligations?
A. If the taxpayer obtains the "benefits and burdens" of ownership of a residence in a seller financing arrangement, then the taxpayer can claim the credit even though the seller retains legal title. Factors that indicate that a taxpayer has the benefits and burdens of ownership include: 1. the right of possession, 2. the right to obtain legal title upon full payment of the purchase price, 3. the right to construct improvements, 4. the obligation to pay property taxes, 5. the risk of loss, 6. the responsibility to insure the property and 7. the duty to maintain the property. (7/2/09)
I guess I need to get a lawyer to draw the necessary paperwork
congratulations, phundo, on doing your homework in preparation for your intended purchase.
i hadn't researched this myself as deeply as you, and that makes me pleased that i've not tried to answer questions such as yours earlier. it is always best to discuss what you plan with a tax advisor or seek information directly from the irs.
yes, it is in your best interest to contact a lawyer to draw up the necessary documentation. you're moving in the right direction.
i hadn't researched this myself as deeply as you, and that makes me pleased that i've not tried to answer questions such as yours earlier. it is always best to discuss what you plan with a tax advisor or seek information directly from the irs.
yes, it is in your best interest to contact a lawyer to draw up the necessary documentation. you're moving in the right direction.
One thing you could do is set up a lease option contract that way you are not contractualy bound to property 100%. This would give you the option to purchase the property in the future and it will also put your current rent payments towards your purchase price. If you don't want to purchase it for some reason along the way you have the option also to not purchase it.