Not everyone has thousands of dollars lying around for a down payment when they are in the market to purchase a home, so receiving a gift can be a great option!\u00a0 Here\u2019s what you need to know, if you\u2019re lucky enough to receive a down payment gift.<\/p>\n
There is a common misconception that you can use whatever monetary gifts your friends and family give you toward your down payment, but it isn\u2019t quite that simple\u2014the source<\/em> of the funds actually matters more<\/em> than the amount<\/em> in your bank account. \u00a0If your great aunt\u2019s neighbor\u2019s friend hands you $1,000 in cash, don\u2019t deposit it! \u00a0Not only will it be a problem because it is untraceable, but you cannot accept a gift from just anyone.<\/p>\n So, who can<\/em> give you a down payment gift? \u00a0Any immediate family member\u2014parents, grandparents, siblings, or children\u2014can gift funds. \u00a0Your significant other can also give you a gift, but only if you are engaged to be married.\u00a0 Unfortunately, extended family such as aunts, uncles, or cousins would not be permitted to give a down payment gift.<\/p>\n Once an eligible family member has committed to giving you a monetary gift, they\u2019ll need to complete a gift letter.\u00a0 Each lender\u2019s gift letter looks slightly different, but includes the same basic information; the subject property address, the amount of money being gifted, the relationship of the gifter to the giftee, and a statement that the gift is indeed a gift, not a loan in disguise, and will not be repaid. \u00a0Both the gifter and giftee must sign and date the letter.<\/p>\n Want an example? Click here to see an\u00a0Example Home Loan Gift Letter<\/a><\/p>\n Let\u2019s say, for example, that your grandparents are going to give you a gift of $25,000.\u00a0 They plan to pull $15,000 from their retirement account and $10,000 from their savings. \u00a0In addition to the gift letter, they may<\/em> need to provide the following documentation:<\/p>\n Although the actual requirements may vary depending on the loan program<\/a> you have chosen, it is best to let the gifter know ahead of time that these documents may be needed.\u00a0 Next, you will need to provide:<\/p>\nWho can give a down payment gift?<\/h3>\n
What is a \u201cgift letter\u201d?<\/h3>\n
Don\u2019t do anything without a paper trail<\/h3>\n
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Don\u2019t forget to thank your gifter!<\/h3>\n