You’ve graduated from university, landed a good-paying job, your credit score is nothing to shake a stick at, and you even know your debt-to-income ratio—it’s actually good. You
3 Facts You Need to Know About Down Payment Gifts for a Mortgage
Dated: November 11 2020
When you apply for a mortgage you may need funds from those you know to assist with your down payment. You aren’t alone. According to the National Association of Realtors (NAR), 27 percent of homebuyers between the ages of 22 and 29 and 20 percent of those ages 30 to 39 received money from their relatives or friends to assist with their down payment.
Those funds are identified via a gift letter, which is a document that helps you, the borrower, show the lender that your gifted down payment funds are from legit sources who have a relationship with you, and that the money you’ve received is not ill-gotten gains. The letter also specifies that the funds aren’t a loan, and you aren’t expected to pay them back.
Here are a few facts you need to know about down payment gifts.
A Gift From a Fiancé May Require Evidence of the Relationship
If your fiancé is contributing a cash gift, and you’re going to be married anyway, the lender may require evidence of the relationship, like an application for a marriage certificate, receipts for wedding rings, or a lease with signatures of both you and your fiancé.
It Helps to Have Gifted Funds in Your Account Months Before You Purchase
If you expect to receive a gift for a down payment it’s best to have the money in your account months ahead of when you go to buy a home. Says Jessi Bostic, owner of Utah-based Kismet Lending, "You only have to show 60 days of assets. If you get money in May and purchase the home in August, underwriters think it's your money [and] you don't need to source it. Thinking in advance can help,” she said, according to MSN.
Individuals With an Interest in the Property Cannot Gift Money
Someone who has a personal interest in a property, such as the listing agent, cannot give the buyer a gift toward the down payment. For instance, if the agent is the father of the person who’s purchasing the property they are not permitted to give their son or daughter funds for the down payment since that agent would then have a vested interest in selling the home.
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Chip is the IT Manager for Alex MacWilliam Real Estate. He handles the technology needs of the company as well as helping agents in their day to day problem solving.....
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