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.
Weichert, Realtors - Media
606 E. Baltimore Pike, Media, PA