Using GIFT MONEY for a Downpayment

Posted in Financial,Mortgage info by jdowler on May 20, 2008
Tags: buyers, carlsbad, down payment, first time buyers, gift money, mortgages

A large number of buyers these days, especially in more expensive housing markets like Carlsbad (and Southern California in general), are struggling to purchase homes. A major issue is the downpayment.

Part of the problem is the changing requirements by the mortgage companies that make 100% financing hard to find, and not available in many cases. Even if you can afford to make monthly payment, without a downpayment your options may be pretty limited.

Coupled with that is the reality that many buyers, especially first time buyers, do not have much of a down payment (10% for a starter home in our area is $50K, but in some very different housing markets you only need $10K). And if you are putting less than 20% down you will be required to have mortgage insurance which adds even more to the costs.

One solution for some folks is GIFT MONEY. Buyers can take advantage of gift money from parents or other relatives to be used for their down payments. Givers can provide up to $12,000 without tax implications (I advise checking with a local accountant or tax professional to see about any restrictions or requirements), but there is no limit to HOW MUCH you can receive as gift money and use for a purchase.
You will need to provide NOTARIZED letters regarding the gift (from each of the givers) stating that the money is a gift. Check with the lender you are working with to see if there are other requirements, and how to best structure the right loan program for YOUR situation.

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If I can provide more information about Carlsbad and surrounding areas, or the housing market in general, or otherwise assist you in your homes search, please contact me by phone or text at (760) 840-1360
or email me at JDowler@remax.net.