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Down Payment Gifts – Avoid The Obvious Mistakes

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Mortgage Down Payment BasicsIn Which You Say Down Payment Gift Three Times

Trying to use a cash gift from friends or family as a down payment on a home is like rattling a can opener around cans of dog or cat food. Presumably, if you have the food you have the pet also and immediately get its full attention, whether you want it or not.

In the case of the can opener, it’s your dog or cat that miraculously appears. Your furry best friend goes from sleeping in the other room to hungrily staring at you in seconds.

Cash gifts passing into your bank account make your branch manager and the government wake up and take an interest. You will have to prove that it’s a gift, and the person giving it will have to prove they have it legitimately. You are going to get a lot of attention.

Getting Ready To Find A Chunk Of Change

When you are buying real estate, and you don’t have cash from selling your last home or out of your savings account, one of your biggest challenges is likely to be finding the funds for the down payment.

When you finance a home purchase with a mortgage, your lender will expect that you contribute a share, the down payment. The convention in residential real estate is that the deposit is at least twenty percent of the purchase price. Government programs such as FHA allow you to put down a smaller deposit if you buy mortgage insurance for the exceptional amount.

How To Present A Down Payment Gift Letter

When you are purchasing real estate, you are journeying right to the heart of the financial system. You’re going to generate some serious scrutiny if you bring in any sources of funding that are hard to track.

Banks and government agencies see transactions of every description; this includes some shady deals; if it’s possible, the banks have seen it all before. So, they have very carefully developed policies and procedures to ensure that they don’t inadvertently facilitate money laundering.

Couples Can Double Up On Giving

Having someone who is willing to help you buy a home is a real blessing, it’s likely to be someone close like your parents or in-laws. This noble third-party still needs to prove to your lender’s satisfaction that they are helping with funds from a legitimate source. Some rules determine how much a person can give as a down payment gift for tax purposes. Currently, one person can give $14,000 per year, and a couple can give twice that.

If your benefactor agrees to it, the best course of action may be to accept the cash early, before you begin the pre-qualification process. When it comes time to give the finds to the escrow company, you can then do so from a paper trail of regular bank accounts.

Your lender will happy, and you are more likely to get a loan on terms you like, and then you can close on a home, and collect the keys. All that remains after that is to open a can of tasty treats for your cat or dog, a bottle of a favorite beverage for you, and celebrate.

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