Iâ€™m not a lawyer nor am I a tax professional. So, any action you decide to take after reading the following should be reviewed by both of these professions before taking any action.
First, we need to clearly define what you really mean when using the term "Co-signer." There are various loan programs available today, and for our purposes Iâ€™m going to define these as FHA and Non-FHA. In the Non-FHA world there is no such thing as a defined â€œCo-signerâ€, there is only a Borrower and Co-borrowers. However, in the FHA world Co-signers are additionally defined. Here are the different distinctions:
Borrowers and Co-Borrowers take title to the property, are obligated on the mortgage note and must also sign the security instrument. The Borrower/Co-Borrowerâ€™s income, assets, liabilities, and credit history are considered in determining total creditworthiness of the transaction. On the other hand (just FHA world now), Co-signers do not hold ownership interest (title) in the property, but are liable for repaying the obligation and must sign all documents with the exception of the security instrument. The Co-signer's income, assets, liabilities, and credit history are considered in determining creditworthiness for the mortgage and the co-signer must complete and sign the loan application.
So, are you a Co-signer or Co-borrower?
Now letâ€™s move on to the FTHB question. A "first-time home buyer" is defined as a buyer who has not owned a principal residence during the three-year period prior to the purchase.
If you were a Co-signer on a FHA loan, and you did not buy a personal residence over the last 3 years you are very likely a FTHB. In my opinion, a Co-signer is not a buyer because there is no transfer of title, and therefore, the three-year period test is a mute point.
On the other hand, if you were a Co-borrower on a Non-FHA loan, and it is still within the three-year window, you are likely NOT a FTHB. The only way that I am aware of where one can be a Co-borrower and treated as a FTHB is if the buyer can substantiate via records/tax returns they rented out their portion of the house. This is because ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time homebuyer.
Some of the questions need to be answered before one can qualify you as a
first time home buyer.
When you co-signed for a friendâ€™s home loan, did you sing it as a non-occupant co-borrower?
How does property title read?
How long ago did you co-sign it?
What kind of benefits you are looking for as a first time home buyers?
Tax credit of $7,500? Are you thinking of getting the FHA financing?
Good luck to you,