Everything you need to know about using gift money as a down payment
One of the most stressful aspects of buying a home is saving up for the down payment that is required for the purchase. In some cases, you may have a family member who wants to help by contributing to the down payment. The licensed mortgage loan officers at Premium Mortgage Corporation have years of experience working with future homeowners across New York and Vermont who have used a gift for their down payment. Through their experience, they know there are rules and regulations that potential homebuyers need to know.
Use this helpful guide to prepare you for the mortgage application process.
Types of Gifts
The most common type of gift is money from either one or more individuals. Most mortgage loan types restrict gifts to relatives, while FHA loans have a broader gift acceptance including a family friend, employer, and a grant.
Another kind of down payment gift comes in the form of home equity. This situation occurs when a member of your family offers to sell your home to you for less than its appraised value. The price difference that you're saving can be used as a down payment, similar to a cash gift.
Gift Rules Based on Loan Type
Each loan type has different rules regarding using gifts as a down payment. Most of the mortgage loan options require you to also pay a certain percentage of your own money on top of the down payment.
Cash is not an acceptable form of payment for a gift as lenders require a paper trail.
Gift Money Paperwork Requirements
When it comes to the paperwork associated with the gifts, your mortgage broker will have specific requirements you will need to provide to verify that the transfer of funds is a gift and doesn't need to be repaid. This paperwork is called a gift letter.
The gift letter must be written and provided to the broker by the person or persons who gave the gift to you in either form. It will include their contact information, relationship, the amount, and a section identifying that the money was indeed a gift. Your mortgage loan provider will be able to give detailed information on what the letter should include.
If you're ready to start the mortgage loan process, contact the home loan providers at Premium Mortgage Corporation. The seasoned professionals offer locations in Buffalo, Rochester, andSyracuse, NY, as well as Barre, VT. Find out the approximate amount you'll need as a down payment by using their mortgage calculator and take the next step in your home loan process by contacting a loan officer through their website.
About Premium Mortgage
Headquartered in Rochester, New York, Premium Mortgage Corporation serves residential real estate markets across upstate New York, Florida, Vermont, Massachusetts, Connecticut, Pennsylvania and Ohio. Since opening in 1999, the company has grown to over 100 employees and attributes its success to matching mortgage financing to individual clients' needs, while also giving excellent customer service to real estate agents in the community. For ongoing mortgage news, please visit: www.premiummortgage.com and follow Premium on Facebook, Twitter, and Instagram.