Tips For Buyers Using Downpayment 'Gifts'

It's nice to have a family member or friend help with the down payment of a home but there are steps you must take to make that money count.

According to the National Association of REALTORS®, many of today's first-time home buyers use gifts from relatives to fund the down payment for a home purchase. However, lenders are carefully scrutinizing these gifts to ensure buyers are not getting a second loan.

Here are some steps for buyers to follow to make the use of a gift a smooth process:

  • Plan ahead. Before applying for a mortgage, have the gift money deposited into your account to avoid too much scrutiny.
  • Put it in writing. A gift letter written by the giver is a must for lenders. Be sure the letter states the money is a gift, the specific amount being given, the relationship to the borrower, and repayment is not required.
  • Cash isn't always king. Lenders can be leary about cash gifts so it's best to have the money come in a check or wire transfer so that it’s traceable.
  • Consider federal gift-tax regulations. Individual gifts of more than $13,000 must be reported to the IRS and are subject to tax.
  • Know your loan product. Certain types of mortgages may limit how much of a down payment you can receive as a gift. An FHA loan for example, does not have a limit on gifts but conventional loans may have different requirements.


Like my tips? You'll love what I can do as your Realtor®. Don't forget, if you or someone you know is planning on buying or selling a home, give me a call and I'll make your home ownership dreams come true.

Kristy O'Connor
Weichert, Realtors - Media
606 E. Baltimore Pike, Media, PA

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Gus Dahleh January 11, 2013 at 04:27 PM
Good Tips! One really important thing to note is that gifts are considered taxable income so it is wise to let the IRS know about any gifts over 13,000! Thanks for the read http://gusdahleh.wordpress.com/


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