DOWN   PA YMENTG I F TS   H ELP   Y O U

GET   T H E   HOME   YO UWANT

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It used to be that homebuyers had to put a portion of their ownmoney down on a home in addition to the gifts they werereceiving from others, but today that is no longer true in mostcases. You can now get 100% of your down payment from afamily member and in many cases, even get the closing costsgifted as well. This makes it much easier for many people to ownthe home they want despite the fact that they do not have alarge amount of assets to put towards the home.

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USING GIFTS FOR DOWN PAYMENTS

Conventional loans, FHA loans, USDA, and VA loans allow mostborrowers to be gifted 100% of their down payment and closingcosts. There are a few exceptions to the rule for conventionalloans, however. If the loan amount is over $417,000 or the amountof the gift is less than 20% of the purchase price and you arepurchasing a multiple unit home then you will be required to put5% of your own money towards the transaction.

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USING GIFTS FOR DOWN PAYMENTS

This gives you a little “investment” in the property, which makeslenders feel better that you will not give up and let the home gointo foreclosure if you meet with hard financial times. The keydifference in VA and USDA loans, however, is that there is usuallyno down payment required, but the gift can be used to help withclosing costs or to make up the difference between the purchaseprice and an appraised value, if there is a difference.

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THE PARTICULAR REQUIREMENTS

Just because you can have a gift for the down payment on yourhome does not mean you can take it from just anyone or underany circumstances. The lender will need to source the funds,ensuring that it is not a loan, increasing your future debt-to-incomeratio as you try to pay the money back. Generally, the persongifting the funds needs to be a relative and the funds need tocome from their own income. In addition, the person gifting thefunds cannot have any direct relation to the sale of the home. Ifanyone is considered an interested party to the sale of the home,their money will not be able to be part of the gift for the downpayment.

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THE PARTICULAR REQUIREMENTS

The only exception to the interested party rule is how closing costsget paid. If the interested party is willing to contribute money, it canbe used towards a portion of the closing costs, but typically not allof them. This rule applies to the FHA and is directly related to theloan size. Conventional loans typically do not allow money from aninterested party.

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PROVING THE INCOME

One of the largest requirements when it comes to money gifts issourcing the money. This is more than showing that the moneycame directly from a relative’s bank account. The money needs tobe trailed for at least 6 to 12 months. The trail will source theincome for the person providing the gift as well as requiredocumentation showing the withdrawal of the money in theperson gifting the money’s account as well as receipt of themoney in your account.

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It might seem like a lot of work to get a gift for a mortgage, but itis well worth it if it means you can get the home you want. Aslong as you keep a detailed paper trail, most lenders will walkyou through the process rather easily, allowing you to own thehome of your dreams with the help of your relatives.

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INFORMATION PROVIDED BY:

Justin McHood

Mortgage Commentator

Information Originally Published:9/24/15

Justin McHood is Americas Mortgage Commentator and hasbeen providing Mortgage commentary for over 10 years.

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