Expert: Karyn Foley - 11/14/2009

Question
Hi
We live in northeast NJ where prices and taxes are high compared to many other states.  My single 25 year old live at home son wants to invest in buying real estate.  He has $15,000 to put down.  I thought it was a good idea if we went in together and I added $15,000 so we have more $ for a better location or house.  I have a few questions:
1) He would be the "buyer" to take advantage of the $8,000 first time buyer credit and I would be like a silent partner. Is that possible or is there a better way where we are both listed on the mortgage and the Title.
2) Because he is looking to spend around $175,000 max, he is looking more at condos and I would prefer a house because I think a house would go up in value more than a condo in 3 to 5 years period.  We would like the rent to cover the mortgage and make the profit from selling in 3 to 5 years.
3) Do you know if the $8,000 credit can be applied to the down payment or closing costs?


Answer
Dear Lou:
 First thing you do is check with a lender.  Down payments are required, and your son's amount may not be enough.  Some lenders will accept a gift of money to the borrower, others will need to have you on the loan to co-sign.  The people on the loan are usually also necessary to be on title.  After closing, you can quit claim your interest on the title to your son, but not on the loan.  He will need to refinance in the future in his name only.  Qualifying is tough now-a-days also.  A pre-approval letter from a lender is customarily asked for during the offer process since many buyers cannot consummate the transaction and prudent agents and sellers want to know in advance who is viable.  
 1.  Question one:  I believe, but do not know for certain if he must be the only buyer.  He also has to fit within a framework of income that he earns.  Check with your agent or CPA for specific details.
 2.  Question two:  Your lender, once he/she knows the price that you qualify for, will discuss the appropriate loan and how much the monthly costs will be for principal, interest, taxes, and insurance, plus homeowner monthly fees if applicable.  Then, compare it to rental rates in the area and you can then see if it makes sense.
 3.  The credit - to the best of my knowledge - is not given to you until your taxes are prepared and paid.  Again, check with your professional agent and/or accountant.  You need cash to pay for the down payment and closing costs, that is why you need to do your homework.
 You need to  go out and see if there is anything in your area that would be acceptable and applicable right after you research and find answers to your moneytary questions.  Keep in mind, that even thought your prices and taxes are high in your area, out here in the west the prices are waaaay
higher.  You just can't win. In states where prices are lowers, the taxes are higher, and vice versa.  It is a difficult market now for both buyers and sellers so a lot of homework needs to be accomplished.  Don't be shocked by what you learn.  Good luck to you, and keep me informed.
Karyn Foley