Buying my first house from my Dad, and I need a little advice

[JOSH ELIOT]

Hi,

I listen to this podcast often and I love it.

I’m not sure how to strategize this. Here’s the deal. I’m 47, buying my first house in Granada Hills, California with my wife and child. My father is selling me his house. It was appraised at $672,600. There is $350,000 left on his mortgage. All he wants from me is $100,000. So, if I came up with a $450,000 loan he would be happy. My lender is a credit union. My credit is 799. A bank told me I could probably buy a $700,000. house with my excellent credit.

The appraisal for the house came in after I filled out the paperwork for the pre-approval at my credit union, so we didn’t know how much the house was worth, but I wanted to get all the pre-approval stuff out of the way because I didn’t know how long it would take. As it stands now, the pre-approval from the credit union says I'm approved for a $540,000 purchase price on a house (again we didn’t know the value of this house at that time) which equates to a $430,000 loan after my 20% downpayment. My mortgage would be about $2000. a month, which I can do. 

So what I care about right now is, only the Loan amount, because I know what I need dollar-wise to get the house. Is that wrong? Am I thinking about the wrong number? A friend of mine tried to tell me to increase the sale price of the house, because later if there’s a gain on the house when we sell it, I’ll have to pay less on taxes. I heard about the $250,000 allowed per person when we sell the house. We will probably live there for 5 -10 years or longer, who knows.

When I speak to the lender, I don’t know how to ask for a $450,000 loan amount. Is there a way to ask? Do I just flat out ask? 

I am aware of the “fair market value - arms length transaction” that certain Agencies will be looking at, which may affect this and blow everything out of the water. I can’t afford to pay more than $2,300 a month mortgage. 

Can I even get the house for $450,000, if it’s worth $676,600 or will “they” make him increase the amount of the sale price? (I never understood that, who do they think they are? Why do I have to increase my mortgage payment just for them? If my father wants to sell me the house for $450,0000. he should be able to sell me the house for that amount without anyone interfering, right or wrong)?

My math question is, am I able to determine what the sale price is of the house is if I already know what the loan amount will (should) be? I realize I’m doing it backwards but I’m in the unique position of knowing what the seller needs from me.  This would be useful to say to the lender, I would think. If I could figure out somehow the sale price of the house, then have the credit union give us a loan of $450,000, everyone would be happy. How do I calculate this? 

There is something called a BOE-58-AH Claim for Reassessment Exclusion for Transfer Between Parent and Child. It’s a form I can fill out that will help with my property taxes or at least that's what someone told me. Then I heard it doesn’t help me, it helps my Father. People are telling me to use this form anyway. Thoughts on this? 

Prop 13 exists in California! Can I make it work for me? 

If I have the option to throw out the first number to my lender, how much should I buy the house for? I only have $100,000 to put down as a downpayment, remember. Can I make this work by just putting $100,000 down?

Do I want to buy the house for more that $450,000 (if I'm given the choice) so that when I sell it and there's a gain I won't get nailed in taxes? Won't that increase my mortgage payment if I can only put down $100,000 as a downpayment and the sale price is say, $600,000? I would need to put more of a downpayment in to keep the mortgage payment low, but I don't have it right now.

I know if I don't put 20% down, I will have PMI so I'm trying to stay away from that.

Thanks for your time, everyone!