Potential homebuyers with generous connections may benefit from using gifted down payment funds. With a down payment gift letter, you can provide the money for a down payment to your mortgage lender even if it was obtained as a gift.
Here are some of the common questions and answers about payment gift rules in real estate:
A down payment gift is when somebody contributes their own funds to help you afford a down payment for a mortgage. Mortgage lenders have specific rules about down payment gifts, including requirements for proving receipt of the funds.
For conventional loans, acceptable gift funds must come from relatives. This includes parents, grandfathers, siblings, kids, fiancés and spouses. It can also include relatives via adoption or guardianship.
Other loans – such as those offered by the Federal Housing Administration – provide more freedom to give money as a gift. A down payment gift can also come directly from employers, unions, charitable organizations or other non-family members.
A gift letter is an official document proving the money for the down payment is actually a gift and not a loan. It must have information for both the giver and recipient, including contact information, source of funds and specific instruction for what the gift funds can be used for.
While you might not have to pay taxes on gift money, you may be required to declare it if it's over a certain amount. Any payment gift amount of $15,000 or more must be reported to the IRS.
Using gift money can be an excellent option for affording a down payment on a new home. As long as you follow the rules for your specific mortgage lender, a mortgage gift letter can be your ticket to home ownership.
Licensed since 1983 Donna is a well known and well respected veteran of the local real estate market. Donna has made her mark as both a manager of a brokerage firm and as an agent. Ms. Coakley McGowan has participated in extensive training in residential real estate and specializes in both Buyer and Seller Agency.
"I am extremely pleased to welcome an Associate of Donna’s caliber and expertise” said Judy Leonelli, Owner. "I have known Donna for many years and have admired her professionalism and talent for the pragmatic resolution to the difficulties that can arise during a transaction. When Donna is involved you know there will be a successful outcome.”
Ms. Coakley McGowan has lived in Upton since 1995 and knows the area and all of its attributes. She currently serves the Town of Upton and the Regional School District as Chairperson of the School Committee. She and her husband Mark and their two children reside in Upton.
