Need Help- Buying first home with dad's help

[Joe Edwards-Hoff]

Hey all,

I guess this isn't my first home, but it is my first home that I am buying to personally live in with my wife. And according to a bank, I am a first time home buyer.

Anyway, here is the scoop. I have been wanting to find a small SFR for my wife and I to move into as a start home with the intention of moving out in a couple years and renting. A house popped up in my town for 65k. It was foreclosed on and is owned by Freddie Mac. The house would rent for about $800 +/- $100 in my college town. Not quite 2% rule, but if I move in it'll work nicely.

I don't have much for a down payment right now, though I could get 10% pretty easily. Either way, my dad offered to help me with the house if I needed it. I figure I want to go the best route possible, with or without his help. Though he doesn't have cash in the bank, he could get a home equity loan very easily with the setup he is in (I don't know too many details there, but he helped me consolidate a few credit cards after college). If he loaned me that money, I would have to pay it back at 4.5% interest with interest only minimum payments. Pretty sweet deal in my opinion. The only catch is that he'd rather not have the debt in his name for an extended period of time. Otherwise I'd just have him hold the note.

We have come up with two options and would like to hear your thoughts, or alternatives.

1) He loans me a little money for the down payment (I'd try to find a way to make it not look like it was just given to me, if need be for getting a loan. Like sell my 67 fastback mustang for 10k) And then my wife and I go get traditional financing.

2) He loans us the full amount plus a little bit for rehab work and then we refi after we get the house shaped up a little.

The house needs some work, mostly cosmetic. My dad and I figured $6500 would cover all of the materials. I am a shop teacher and will have a summer off to do repairs if need be.

Anyway, I'd love to hear your thoughts. We're renting right now and the payments on this house would be about the same as our rent, so it makes sense. And my wife wants a washer and dryer really bad... ;o)