We became homeowners in 1983 when a similar arrangement between my father and us collapsed. He'd heard from someone at work that he could help us buy a house by letting us rent for several years while he updated it and then we'd assume the mortgage on an updated house. We got a house under contract at a price point we could afford in 5 years per the plan, got quallified for the mortgage which my father was going to assume from us, and closed on the property. Then my father got cold feet and backed out. We ended up with more house than we could afford (dad did kick in for a year or so to help with the mortgage payments) with a new baby on the way and a negative cash flow when she arrived.
We were too wet behind the ears to check anything out, and my dad was a world class procrastinator. When he did check things out, we already owned the house and he found out that his tax shelter/help us buy our first house scheme would not work out. We struggled for years with the payments and maintenance on that house. My dad died in 1995 and it's been a sad bit of history between us. Throw a disgruntled stepmother into the background and the scenario doesn't get any prettier.
Check it out. Put the arrangement and agreements in writing as you would any other business venture. You'll be glad that you did. Then everyone will know they're on the same page if and when issues come up in the future.
Laws vary from state to state and the chain of title in the case of death ( with out a will ) will vary from state to state to state. So do check with the title company before closing. If you are on the mortgage you must be on the deed. He can be on the deed with out being on the mortgage in most states. Maybe not at the onset but can be added in a few months. You definetely need to speak to the title company. They do know all the Tax exemption answers.