Down Payment Assistance
Are you dreaming of buying a home but balk at the amount of cash needed for the down payment alone? Your down payment will affect the terms of your mortgage loan so the importance of this portion of the loan is evident. But what you might not know is the source of your down payment can be from a gift.
Being gifted your down payment is a common way for parents or relatives to support you in the homebuying process. However, be sure you are aware of the rules surrounding this gift.
For example, monetary gifts generally require a letter from the gifter indicating the money is not a loan and does not need to be repaid. The letter also helps the lender track the source of your down payment ensuring the funds were not obtained illegally or requires extra taxes.
Today, it is common for couples getting married to set up a registry account for down payment assistance. These accounts help track the source of your money while allowing you to build up your down payment with the help of friends and family (rather than adding to your collection of blenders, toasters, and coffee mugs).
Be sure to talk about down payment assistance options with your Realtor and mortgage professional. Certain loans and gifts require the gifter also provide their bank statements to prove they didn’t get the money from someone else. These precautions are in place to protect the borrowers. If the gift is actually a loan and the giver is expecting to be repaid, these payments must also be taken into consideration when determining if the borrower has the means to make all payments successfully.
So don’t let a down payment hold you back from achieving your dreams of homeownership. Talk to a mortgage expert to learn more about your down payment options including gifts to help you get the home you want.