How to Legally Get the First Time Home Buyer Tax Credit on a Rent to Own!
Because getting a mortgage has become so challenging, more and more people are turning towards rent to own homes as an alternative to conventional financing. Renting to own lowers the barriers of entry and provides a quick and relatively painless way to get into a home.
Unfortunately, most rent to own contracts do not allow you to qualify the $8,000 first time homebuyer tax credit. The primary reason for this is that a sale must take place in order to be eligible for the tax credit. Most rent to own home contracts give you the option to buy, but you have not actually purchased the home nor are you in any way legally entitled to do so.
Does this mean that getting a traditional mortgage is the only way that you can legally get your tax credit? Actually, no! The only thing that has to happen for you to be eligible for the tax credit is for you to purchase the home. It does not matter where the funds come from or how the financing is structured.
What this means to you is that owner financing and contract for deed financing can qualify you for the tax credit. Of course, you probably know that owner financing can be difficult to find, even in a market where most sellers would do just about anything for a quick sale. The reason is that few sellers want to offer long term financing and even fewer want to run the risk of having to go through the lengthy foreclosure process in the event of default.
The solution? A properly structured contract that gives the sellers the protections they desire and allows you to legally obtain the federal tax credit. This means that you get $8,000 and they get a shorter term and a conversion feature in the event of default. This creates a win-win for both parties.