Have you been thinking about buying a home? Maybe even your first home?
Not sure if you have saved enough money for the down payment and closing costs?
Well don’t fret, there are many programs and mortgage types available today to help you clear these hurdles, AND we can also look to family for help as well!
Did you know that about ¼ of all 1st time home buyers use “gift money”? Relatives can help you with funds for a down payment, but let’s be wise about this….
….according to data from the National Association of REALTORS® (NAR) lenders are carefully scrutinizing such gifts. The reason for this is a good one ~ banks want to make sure that the buyer isn’t getting a second “loan” from someone, which would, of course, change the financial picture you and your lender have been painting. So if $5,000 or $10,000 (from a really NICE relative!) just shows up in your savings account, there’ll be some explaining to do! !
In a fairly recent article, The New York Times provided some of the following tips in making make these lenders checks and balances go smoother for home buyer:
~ have the money come in a check or wire transfer so that it’s traceable. Lenders often become cautious over cash gifts.
~ have the relative provide the lender with a gift letter, which verifies the money is a gift, the specific amount being given, the relationship to the borrower, and that repayment is not required.
~ if possible, have your relative deposit the money now, prior to house hunting and mortgage application. There will be fewer questions if the funds have been “seasoning” in your account for a couple of months.
~ don’t forget the federal gift-tax regulations: Individual gifts of more than $13,000 (that REALLY NICE relative!) must be reported to the IRS and are subject to tax.
A final note, please be aware that certain types of mortgages may limit how much of a down payment you can receive as a gift. For example, conventional loans require at least % of your own money that is NOT a gift, but FHA loans, which are popular among first-time home buyers, do not have any limits on gifts and borrowers can use gifts to cover the entire down payment!
Still have questions? I’m happy to answer them ~ let me know what they are and I’ll do my best!
FYI ~ http://nyti.ms/VEPDgtt