Another Tip for my Puyallup First Time Home Buyers

 I have gained a reputation for being the guy who always gets the "hard" loans, and most interesting situations, and I have always taken a great deal of pride in finding a way to get them closed.  This post falls into the category of "there is no such thing as a normal deal."

I was recently introduced to a young, newly engaged couple interested in buying their first home in Puyallup.  I did the usual First Time Home Buyer meeting where I go over what they will need, and how the process works.  Normally, this is pretty standard stuff since I am an authorized instructor with the Washington State Housing Finance Commission for First Time Home Buyer seminars.  However, this time I was stumped, and was required to research a few options directly with the IRS concerning qualifying for the First Time Home Buyer Tax Credit.

One of the situations that can disqualify a buyerfrom receiving the $8,000 FTHB Tax Credit is buying from a "close relative,"and this couple had an opportunity to purchase a home from the Groom to be's "Step" Grandmother.  The property was originally owned by his blood grandfather who had passed away a couple of years ago, and the Title history showed his family name as the only name on the chain of title for decades.  I ended up having to go directly to the IRS legal department for an answer, and this one even stumped the instructor for their auditors!  Since there was no blood relation between the current owning grandmother the wording of the law worked for us, but because she had acquired the property via inheritance from the direct blood relative that worked against us.

In the end, we were able to sort through all the distractions, and get confirmation that they would indeed get the full tax credit, but not because of the lack of blood relation.  Instead, we took the path of least resistance.  When non-married co-borrower's are buying a home the tax credit can be split between the buyers in any ratio, or allocated entirely to either one.  Since the Bride to be had no relationship to the seller, and they would not be married at the time of the transaction, nor would they be married before the end of this year (therefore they would file taxes separately), we could just allocate the entire $8,000 Tax credit to her as a First Time Home Buyer.

There are other aspects to consider when buying from a relative, such as the maximum Loan to Value limitation of 85% for FHA loans, but I'll blog about those another time.  Just be sure to do your research before writing contracts for a transaction that might be construed under the Identity of Interest disclosures. If you are interested in applying for a mortgage, or have other questions, just click Ron Brown FHA & VA Loan Specialist to visit my secure web page, or simply leave a comment.