Help Please! First time home buyer - Page 2

rangerfan · #11 06-05-2006, 11:54 AM

Adude's advice is excellent. You definietly need to get the advice of a tax professional, and perhaps a local estate attorney as well. There are issues because it is your parent's home.

I do repsectfully disagree with my friend Gresch on one point, however. I think a BMW board is an excellent place to get advice on a complicated matter such as this. You can find (and have found) many smart, generous professionals here who will take the time to offer you an answer full of many useful ideas and much insight. By asking the question here, you now know to ask other questions. So from that point of view, this is the FIRST place to ask questions like yours.

Either way, good luck, and to echo the point made by many others, DO NOT buy a house with your girlfriend, especially your parent's home.

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x5GuyInLA · #12 06-05-2006, 01:32 PM

Quote:

Originally Posted by asawadude

Purchasing your parents home is not the same as purchasing a home from a unrelated 3rd person. Assuming you are your parents' heir, the tax consequences of an poorly planned transaction can create issues for both you and your parents.

You must consult with either a tax accountant, a estate planner, or an estate or tax attorney to discuss various ways this property can be passed to you, while imparting tax benefits to both you and your parents.

You make no mention if your parents are going to sell you the house at less than fair market value. If they do, the difference between the sales prices and FMV can be construed as a gift which would be counted against your parents' allowable gift and estate exemptions total ($12000 per year) and creating a taxable liability. Also, a discounted sale price would mean that you would pay more capital gains when you sell the house later.

Your parents have the option of selling you the house at FMV, but carrying the note at a discounted rate. I forget the name of this rate, but it is rate that is set by the IRS and it is below current mortgate rates. You must make payments to your parents as per the contract, but your interest is deductible as in a standard mortgage. Your capital gains upon sale would be reduced because you are paying FMV instead of a gifted price. If your parents' original intentions were to gift you the home, they could reduce your payments by gifting you in cash yearly up to their $12000 gift limit, thus avoiding a gift tax....

From talking to my accountant and financial advisors, my understanding is that it's $12,000 per parent per person. so if the parents' decided to gift to the gf as well, then it would be $48,000 this year. if this is the case, the parent's could carry a loan for them and forgive $48,000 per year until the loan is paid off. I think there is also a one time gift up to $1,000,000 that a person can gift someone, so that may be another way to circumvent the tax issue. I'm not an accountant or a financial advisor, so definitely check with one. I've just had clients in similar situations, and these were options I was told they have. Good luck.

Thunder22 · #13 06-05-2006, 08:37 PM

Quote:

Originally Posted by rangerfan

Adude's advice is excellent. You definietly need to get the advice of a tax professional, and perhaps a local estate attorney as well. There are issues because it is your parent's home.

I do repsectfully disagree with my friend Gresch on one point, however. I think a BMW board is an excellent place to get advice on a complicated matter such as this. You can find (and have found) many smart, generous professionals here who will take the time to offer you an answer full of many useful ideas and much insight. By asking the question here, you now know to ask other questions. So from that point of view, this is the FIRST place to ask questions like yours.

Either way, good luck, and to echo the point made by many others, DO NOT buy a house with your girlfriend, especially your parent's home.

you're right

i stand corrected.

loansinpa · #14 06-05-2006, 10:07 PM

As far as the lending things go, consult with a local mortgage professional. The internet is a great place to get general information but each state and sometimes locality has different rules, charges, taxes and available programs. Any lender you are talking with should have no problem providing you a good faith estimate. Compare lender costs, fees, (line 800 items) rates (based on lock period, 30, 60, 90 day etc). Anything outside the lenders area should be the same no matter who the lender is (ie taxes). Strait up is the only way to do business. Good, bad or indifferent.

Here in PA a transfer of property between relatives will avoid the 2% transfer tax. I would imagine it might be different there. There may also be first time buyer programs. Most vanilla loan programs don't price off of credit score but having a good score will qualify you for more programs. Interest only may lower your payment...temporarialy...but can get you into trouble over the long haul. Be careful.

Programs like FHA and others allow you to use a 'gift of equity' to help cover down payments and closing costs depending on how much your parents are willing to leave in the propery. This could have you needing little to nothing at the closing table.

Check the gift tax info. My understanding from locals was that anything over the 12k per year just had to be reported but wasn't taxed until they hit the lifetime cap. I'm no cpa.

Rates can vary from day to day depending on the loan program and length of lock. Fixed rates are based on mortgage backed securties that are sold on the bond market so are subject to market fluctuations. Friday was a good day based on the poor jobs number. Today...not so good...gave a little back. If your going to compare rates you almost should to be doing it the same day. With the right lender you will see that is really is a service business and less of a commodity business. A rate is only as good as the loan it's attached to and your situation.

Yes, I'm biased.

LeMansX5 · #15 06-05-2006, 11:51 PM

Good advice here. As others have said, do not buy with your GF.

VF1-X5 · #16 06-06-2006, 01:08 AM

You guys all rock!

That is exactly what i was wanting to do, just get info about what to do to get the ball rolling. i had no idea aboout all these tax liabilitied gifting etc. i have learned a lot from all of your views. And i do agree with RangerFan. That why i posted this here because i know that we all on this board are very intelligent peoples.

we'll see what happens

HamannE53 · #17 06-06-2006, 01:32 AM

uhmm...as a realtor my self/ R.E. appraiser....did you hear the part about not buying with your GIRLFRIEND?

Remember "A partnership is a sinking ship"

Michelle · #18 06-06-2006, 06:23 AM

Do you live with your girlfriend now? If not, then definitely do NOT buy with her!

vinuneuro · #19 06-06-2006, 08:03 AM

Quote:

Originally Posted by Michelle

Do you live with your girlfriend now? If not, then definitely do NOT buy with her!

Screw that, living with her doesn't change the consequences of them splitting up while they jointly own the property.

Just of curiosity though, what would happen if they bought the home together and then split? Would they determine how much each one has vested in it primarily off how much each contributed towards the downpayment?

VF1-X5 · #20 06-07-2006, 12:21 AM

Yeah, my girlfriend and i have been living together for 5 years now. we're practically engaged. so thats whats goin on there. my freind already did the whole buy a house with your girlfriend after like 1 year of being together. they just split up a few months ago and boy was that a mess. So i appreciate all your concerns about the whole gf thing but as i see it were engaged, just waiting to pop the question and thats a whole nother story hahaha...but we are happy though

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