I bought a home and made a higher offer with a big credit on closing costs to be paid by the seller. A loan officer told me the points may still be deductible as the credit amount on the closing docs do not show what they are paying for.
2007-06-03 13:14:00 · 5 answers · asked by Anonymous in Business & Finance ➔ Taxes ➔ United States
Yes, you can deduct mortgage loan points even if the seller pays for them. It used to be that if you didn't pay them you couldn't deduct them, but they changed the rules for that. Basically what you are supposed to do in the case where the seller has paid for the mortgage loan points, but you are deducting them, is that you subtract that amount from your basis in your house. I have included a link that explains this, but have attached an excerpt from it.
Points paid by the seller may be deducted by the buyer provided the buyer subtracts the amount from the basis, or cost, of the residence.
2007-06-03 14:05:27 · answer #1 · answered by Anonymous · 1⤊ 0⤋
You paid more for the house and took out a larger loan so that the seller would pay cash at closing to cover some of your costs. This is a mere technicality, you borrowed the money from the mortgage company, and then in turn the seller paid some of your closing costs. In reality you paid everything.
You can deduct all points on the mortgage, as long as the full amount of the loan is secured by the house, in other words, the amount of your mortgage loan is not more than the value of the house.
2007-06-03 18:08:04 · answer #2 · answered by ninasgramma 7 · 0⤊ 1⤋
Really depends on how the market is in your area. If you are getting a lot of offers, you can afford to ask the buyer to pay closing costs. If you have been on the market for a while and this is your first offer, asking for closing costs risks losing the offer and waiting much longer for another one to come around. As a first time homebuyer with an FHA loan, they most likely don't have a lot of extra funds sitting around that could be used for closing costs. And as other answers have noted, they will only get the $8000 AFTER they buy the house. Also, with an FHA loan they cannot take out any more loans to help with the down payment or closing costs.
2016-05-20 05:59:35 · answer #3 · answered by ? 3 · 0⤊ 0⤋
This is one of the ways that folks at the loan company seem to try everything that they can to get a loan past underwriters. If there is a direct relationship with the points they should not be take as a deduction. I seem to see a lot of settlement papers with gifts being given from the seller to the buyer. In that case you would be paying the points. What is really interesting is that the commission for the sale and the loan are always on the gross. Maybe folks should give more attention to the loan and real estate agents rates.
2007-06-03 13:33:36 · answer #4 · answered by ? 6 · 0⤊ 2⤋
Technically, if you didn't pay them, they aren't deductible for you. Would you get away with it? Maybe.
2007-06-03 13:20:20 · answer #5 · answered by Judy 7 · 0⤊ 2⤋