Buying home from parents: loan and tax options?

Buying my parents home for less then the appraised value . Need advice on loan, regular mortgage loan or home equity? How about tax options? Now that I find out that I'm not qualified for $8,000.00 tax rebate, because of family transaction.Buying home from parents: loan and tax options?
1. If your parents sell you the house for less than the appraisal value, they will have to file a gift tax form for the difference. Unless they've made a lot of gifts, they won't have to pay tax.





2. If you get a conventional mortgage the 1099-S will show the appraisal value--that's because the bank will treat the gift as having been cash and paid back as a down payment.





If your borrow from your parents, they would have to put a lien on the home so that the house secures the debt. That way you can deduct the interest as mortgage interest. (They in turn MUST declare the interest as income--even if they gift it to you.)





See IRS pub 550 for gift loans.


See IRS pub 936 for securing the debt.Buying home from parents: loan and tax options?
There are several ways you might go about this transfer and getting a mortgage loan.





#1 You might apply for a mortgage loan through a mortgage broker/banker





#2 You parents might become the lender and carry the mortgage note for you.





If you apply for a conventional mortgage, you will be required to provide or pay for an appraisal of the property. If your parents decide to sell the property for less than the appraised value the lender will then make the necessary adjustments and lend you approximately 80%-90% of the sales price of the property, based on the mortgage loan program you are qualified and approved for.








If your parents decide to sell the property for less than the appraised value to accommodate the down payment, this will have to be accounted for in some manner.





The lender or any other person involved in the sale transaction of the property would not have anything to do with making any 1099 for the IRS.





Real estate investors purchase sell property all the time for less than the appraised value. I have never seen an escrow closing agent prepare a 1099 for these type transactions to present or send to the IRS.





During the preparation of your parents income taxes they might have to file some type of gift tax, but this will be decided between the parents and the parents tax consultant.





For tax and legal matters you should contact your tax consultant and attorney.





I hope this has been of some benefit to you,good luck.





';FIGHT ON';