Over the years one of the most common questions that we’ve been asked by home buyers is “how much can I receive for a down payment on a home?”
Regardless if you receive gift money for a down payment on a home that’s $25 or $25,000 it’s important that you thoroughly document where the financial gift for the down payment came from because underwriters will examine every aspect of your personal life.
Underwriters want to make sure that the money in your bank account is actually your money and not gifted to you from friends or family members because they want to confirm that you will actually be able to pay your mortgage loan each month.
Remember to always consult with your mortgage lender first BEFORE deciding on the right mortgage product because the answer to how much money you are allowed to accept from a family member depends on if you are going to get an FHA or Conventional Mortgage loan.
FHA vs. Conventional Mortgage Loan
FHA Loan – You are allowed to accept 100% of the down payment but the gift must be from an “approved source”, meaning that it must come from a friend, relative, employer or labor union and not the Realtor®, broker, builder, seller or associated entity.
Conventional Loan – When you choose this type of loan you must put down at least 5% (minimum contribution may vary by lender) if you are putting down less than 20% but, if you are going to opt for a down payment of 20%, or more, then all of your down payment can be from the gift. – Source Quicken Loans
It’s also important to note that with a conventional mortgage loan you are only allowed to use gift money if you are going to buy a primary residence or a second home.
How to Document Gift Money
Okay, let’s assume that you have received multiple financial gifts and are planning on using that money for a down payment on a home.
Here’s how you should document gift money:
- Write down the name of the donor, their address and phone numbers.
- Include your relationship to the donor (family member, friend, business associate).
- Dollar amount of the gift.
- Date the check or funds were transferred to you.
- A simple statement from the donor that they don’t expect repayment from you.
- Signature of the donor.
- Address of the property you will be purchasing
Contact Fred Sed Realty
At Fred Sed Realty we make buying a home easy and besides having excellent Realtor’s® on staff we also work with our own in house lenders who can guide you to the right mortgage loan for your needs.
Call us now at (800) 322-4643 or contact us through our website http://www.fredsedgroup.com