Obtaining mortgage after close/mortgage interest deduction
In order to make a competitive offer on a house in my town, I've decided to make it all cash with no contingencies.
I've already been pre-approved for a larger loan (another purchase attempt that didn't go through when we were outbid) and my mortgage broker has said he can close very quickly. My plan is to use the time between now and close of escrow (approx 10 days) to finalize the mortgage, but not count on it being final to close escrow.
My question is this: if I purchase using all cash and then take out an 80% first mortgage, is the mortgage interest tax deductible? My accountant said I have 2-3 weeks after the sale to get the mortgage, in which case the interest would be deductible. Anything after that window would be considered a home equity debt and would be limited to the interest on the first $100K in principle. I don't know where he got the 2-3 weeks as he was vague on it and said he'd have to research further to be sure. It also doesn't make sense that this would be considered by the IRS as a home equity loan, when it's actually a first mortgage (according to my mortgage broker who can't give me tax advice).
The IRS doc says this about allowed mortgage interest deductions:
Mortgages you took out after October 13, 1987, to buy, build, or improve your home (called home acquisition debt), but only if throughout 2010 these mortgages plus any grandfathered debt totaled $1 million or less ($500,000 or less if married filing separately).
I'm curious about how the IRS handles this situation and Googling has turned up nothing. I've read the IRS publication and it doesn't deal explicitly with this.
Can anyone point me to more specific rules on tax deductions for mortgage interest in this type of scenario?
Here is a link that might be useful: IRS Pub 936