Does a dependent student's mom moving into and purchasing a house effect FAFSA EFC?

Question

Hi.

My friend's mom is buying a house with her older sister (mom's older daughter). The thing is that she (the mother) has been earning no money here in the states, no taxable income, as it is her family from overseas that sends her money and keeps them afloat. Now that same family that is overseas is paying for the house buy giving her a sum of money for a down payment alongside with paying monthly mortgage, but all of this falls under her mom's name. My query is, will my friend's Expected Family Contribution (EFC) change from zero to something else even though her mother still makes no money? Or is it income based? Because they say she has to report the home on the FAFSA application and she is under 24 and certainly considered a dependent on her mom. She needs help and advice!

Thanks!

Answer 1

The Expected Family Contribution does not include the value of a parent's primary residence, so there is no impact on the EFC calculation when the student's family owns (or purchases) a primary residence.

Now, if the parents owned multiple houses, then yes, the value of the second, third and fourth houses are recognized as investments, not homes, and the fair market value of the home is part of the EFC analysis.

Answer 2

The mother has to account for the money on Parent's worksheet B, question 11 - other untaxed income not reported.

The federal government is not going to believe she supported you on 'no' income.

She will need to report all 12 months of 2007 the monies that her family sent her. In addition she will need to report the monies sent for the down  payment on the house.

This will indeed change your EFC.

Answer 3

Federal financial aid is based on the tax return of the previoius year.  As long as taxes are filed for the previous year, even if no money was owed or a credit due, the FAFSA will calculate the EFC.  If the mother earned no money in 2007, the student will be eligible and the purchase of the house should make no difference.