Purchasing "our" house!

[FutureKelley]

Well, back in July my aunt and uncle took out an investment home loan so we would be able to buy this house. We thought it would be a good investment (of course, that was before the market crashed) and it was cheaper than renting a crappy apartment in this town.

When they purchased it, a deal was struck with the bank that our payments that we are making towards it now will go towards a down payment when we decide to purchase it from my aunt and uncle. Well, as of Sept. this year, we will have just over the 10% down payment for it. I'm really excitied, especially since we will get the $8,000 tax credit for next year if we do! I am just keeping my fingers crossed that FH's credit will go up enough for us to get the loan. As of this time last year it was bad.

The only other thing is... we are going to put it up for sale next fall. We are planning on taking that $8,000 plus whatever else we can build up to try and purchase a house somewhere in Tennessee, Kentucky or North Carolina (haven't really decided where yet). This town has no opportunities, nor anything to do, and we want to move away from here before we start a family. I don't know how long it will take to sell, but if we can't do that we are planning on trying to rent it out.

But, either way, I'm pretty excitied! As much as the house is "ours", it will really be ours later this year (I hope)!

[WebLady]

Hope it all works out for you :D

[Brian's Bride]

Congratulations! Those rent to own programs are pretty slick, especially when a portion of your rent goes to the down payment! Sounds like you have big plans, too! :)

[Kfancii]

Not to be a downer, but is this really a good idea if you plan to sell the house after just a year of ownership? It typically takes at least 3 to 5 years for you to build up enough equity in a home to sell it without being upside down and having to take a big loss on the sale. It might make more sense to just let your Aunt and Uncle keep the house and sell it when ya'll plan to make the move because depending on what the market does and what your house sells for, you can plan on having to spend at least $10K to sell it with a realtor with commission and closing costs. That will eat up that $8K + some in a hurry.

[Brian's Bride]

I lived in my first home for 2.5 years and did manage to break even on the sale. But it was sold in November of 2007, so it was before the housing market really took a dive. I'm not sure how it would work now, but if you can't sell and you find someone to rent it, I think it would be okay.

[Kfancii]

I lived in my first home for 2.5 years and did manage to break even on the sale. But it was sold in November of 2007, so it was before the housing market really took a dive. I'm not sure how it would work now, but if you can't sell and you find someone to rent it, I think it would be okay.

I have been in my house for 9 years and with the current market, I will be lucky if the house appraises for what I owe on it. Not to mention that by the time I pay all the realtor fees and closing costs, at an offer of $5K above what I owe, (if it would appraise that high) I will still have to come up with an additional $5K out of pocket to cover the commission and closing costs. That is with 9 years of payments being applied to the principle of the note.

As far as renting goes, I have looked into this as well, and while you can find renters out there, in my neighborhood the prospects were scary. You can't discriminate on who you rent to and you take your chances on getting a decent renter. I just chose to take my house off the rental market, because the only applicants I was getting were either really young and had no rental history or horrible credit. I'm at a point now where I'm offering my best friend the opportunity to live in my house rent free for a year as long as she will keep up the yard and pay the utilities. That means for about $300 a month she can live in my cute little house and I will keep making the mortgage payments. That is how bad things are here. Maybe I'm being too much of a pessimist, but I would hate to see ya'll get stuck in a situation like I am.

[kgvettegirl]

And until you have lived in the home for 3 to 5 years if you do sell it at a profit, you will owe capital gains taxes. I couldn't remember if it is 3 years or 5.

[FutureKelley]

We are actually purchasing the house for less than what my aunt and uncle paid for it. In reality, they are going to be out the closing fees in the end, but they wanted to help us out and are okay with that. According to their friend, a realtor, the one who sold us this house, with the improvements we made we should be able to at least break even. Now, that's not saying that in the current market sell for that, which is why we are looking at the renting prospect. We actually know quite a few people who are renting other places and have already showed interest in renting our house down the road if we decide to do that. I really don't want to... I'd rather have it sold and over with though.

As far as the additional taxes, yes... we would have to pay those, but that is only if we sell it before we have owned it for a year. My aunt and uncle ran into that when they bought their first house down here and sold it 9 months later (they were told it was one year, which is what I'm going by). They said the taxes weren't too bad though. We won't be able to just have them sell it down the road, because without that $8,000 there isn't a chance that we will ever have enough money for a downpayment.

Pretty much, yes, we will end up losing some money on this house in the end, but it's to the point where it would be worth it to get out of this town. To me, it's way better than renting an apartment and never having anything to show for it.

[Jettadear]

Not to be a downer. But if you take the $8000 its only free money if you keep the home for three years. If you plan on moving before the 3 years are up, you have to pay the whole 8000 back.
http://www.federalhousingtaxcredit.com/2009/resources.html

Also, if its purchased from a relative you can't claim the 8000 either.
http://www.savingtoinvest.com/2009/02/15000-first-home-buyer-tax-credit-in.html

I don't know much about the rent to own stuff but if your relative owns the property you are buying that you can't take the credit.

[Brian's Bride]

Not to be a downer. But if you take the $8000 its only free money if you keep the home for three years. If you plan on moving before the 3 years are up, you have to pay the whole 8000 back.
http://www.federalhousingtaxcredit.com/2009/resources.html

Also, if its purchased from a relative you can't claim the 8000 either.
http://www.savingtoinvest.com/2009/02/15000-first-home-buyer-tax-credit-in.html

I don't know much about the rent to own stuff but if your relative owns the property you are buying that you can't take the credit.

That's good information to know beforehand, to make an informed decision.

[Jettadear]

FH and I bought a home about three weeks ago and I kept hearing misinformed suggestions about the $8000 bill. So I looked it up. There are a bunch of exceptions and if non of them apply to you than the $8000 bill is a wonderful gift from uncle sam. lol If you fall into one of the exceptions than its a horrible trick uncle sam plays by getting your hopes up. I hope alot of OW people qualify for it. Good luck to all.

Oh, yea. To those who bought a house between Jan 1st, 2009-Dec 1st, 2009 (I know wierd date range.) you can claim the purchase on your 2008 taxes. You don't have to wait till you file your 2009 taxes to get the money. If you already filed your 2008 taxes, you can file an amended return and include a Form 5405 with the amendment. (May help with setting up home and maybe extra to pay for wedding expenses?);)

[FutureKelley]

Thank you for that information. I must say that I am dissapointed that the lender down at the bank obviously did not know this, because she didn't tell us when we talked to her.

Well, I guess we are back to square one then. I'm not going to purchase it if we can't get a tax credit for it. However, we won't be able to purchase another home either... we just don't make enough money to save up for a downpayment, even if we wait another five years. :(

[Jettadear]

Im so sorry that the bank got your hopes up. I couldn't believe so many people in the field have no idea about the details of the $8000 refundable tax credit. Im about to graduate with a degree in accounting with a banking (not realty) background and I knew. You would hope a loan officer at a bank would know the details and exceptions of something that was created to increase demand in their field. I hope the bank was actually unaware and not that they were just trying to get you to buy the home. Ethically that would be a huge no no but you never know. Good thing you didn't buy the home and take the credit. The repayment and fees uncle sam would have put would have really been horrible and the bank would be blissfully out of the problem.

[Kfancii]

Thank you for that information. I must say that I am dissapointed that the lender down at the bank obviously did not know this, because she didn't tell us when we talked to her.

Well, I guess we are back to square one then. I'm not going to purchase it if we can't get a tax credit for it. However, we won't be able to purchase another home either... we just don't make enough money to save up for a downpayment, even if we wait another five years. :(

I'm sorry it isn't going to work out the way you had hoped. Are you considering living in a rural area when you move to a new state? If so, find a lender that handles USDA government insured loans, as they are currently the only one out there offering 100% financing.

http://www.rurdev.usda.gov/rhs/common/program_info.htm#SFH

There are a number of different programs through USDA for low to moderate income people. Just be sure to get all the facts about the type of loan the lender is suggesting for you because some of them (like the one I got 9 years ago) include a subsidy towards your house payment based on your income and while it is great when you are living in the house, you are subject to the recapture of that subsidy when you are ready to sell.

[FutureKelley]

I'm sorry it isn't going to work out the way you had hoped. Are you considering living in a rural area when you move to a new state? If so, find a lender that handles USDA government insured loans, as they are currently the only one out there offering 100% financing.

http://www.rurdev.usda.gov/rhs/common/program_info.htm#SFH

There are a number of different programs through USDA for low to moderate income people. Just be sure to get all the facts about the type of loan the lender is suggesting for you because some of them (like the one I got 9 years ago) include a subsidy towards your house payment based on your income and while it is great when you are living in the house, you are subject to the recapture of that subsidy when you are ready to sell.

I appreciate it! I suppose we will just wait the year out and see where we are next summer.