Using Down Payment Gifts? These Tips Are For You
There are many first-time buyers across the nation who will use gifts from relatives or friends to help with their down payment. Therefore, I have some tips that can help you if you are a first-time buyer using a money gift for your down payment.
Many lenders examine these gifts to make sure you’re not trying to get a second loan. When you have large money gifts put into your bank account, the lender just wants to make sure that it’s not a loan against the property. So these tips can help make things easier for you when lenders start checking your bank records.
√ Cash – cash deposits send up a red flag to lenders. Therefore, you should have your money gifts come in a check or a wire transfer so it can be traced.
√ Gift letter – you can have the person who is giving you the gift write a letter to the loan company letting them know the purpose behind the gift. Also, make sure they add in that it is a gift and does not have to be repaid.
√ Deposit timeline – once the money is added to your account, wait a few months before applying for a mortgage. This step will eliminate many questions lenders usually have.
√ Federal gift-tax regulations – you will need to consider the regulations behind money gifts. If the gift is over $13,000, it will be reported to the IRS and it will be subject to tax.
√ Beware of limits – some lenders may limit how much of a down payment you can use from your gift. While Federal Housing Administration loans do not have limits on gifts, the lender on a conventional loan may require you to have at least 5% of your own money for the loan.
When you receive a money gift for your down payment, check with lenders to see what their requirements are about using your gift for your down payment.
This information about using money gifts for down payments is brought to you by: Erika Rogers – your resource for St. George, UT and surrounding communities.
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