Gifts from immediate family members are acceptable sources of funds to help you purchase your new home.

Buying a home is a life-changing event. One large part of the home-buying process is coming up with a down payment, and it can take a bit of time and effort to save up for that down payment. You may have looked into down-payment assistance programs, but there may be an option you haven’t considered yet.  

How Gifting Can Help You With Your Down Payment

October 19, 2016

Gifting may be a good option to help you make a 20% down payment on your new home!

Buying a home is a life-changing event. One large part of the home-buying process is coming up with a down payment, and it can take a bit of time and effort to save up for that down payment. You may have looked into down-payment assistance programs, but there may be an option you haven’t considered yet.

Did you know you can use gifts to help make your down payment? That’s right! Gifts from immediate family members are acceptable sources of funds to help you purchase your new home.  There are no minimum or maximum limits as to how much the donor can contribute.

Wondering if you qualifying for any down-payment assistance programs? Look here to see if you qualify.

Another great benefit of gifting is that gift funds can coincide with other forms of down payments and/or down payment assistance programs. Combining a gift with your down payment savings and a down-payment assistance program can help you reach the 20% down payment mark. Putting 20% down can help you get the best mortgage rate and avoids having to pay PMI on your mortgage.

If a family member wants to make a cash gift for your down payment, it’s important that they take certain steps to complete the process. The first thing they should do is write a gifting letter.

  • The gifting letter needs to contain:
  • the amount of the gifts they wish to give
  • the relationship they have with the home buyer
  • the address for the property that is being purchased
  • their name and contact information
  • this text, “This is a gift and no repayment is expected or implied.”

It’s important to document each step of the money-transferring process when taking a cash gift for your down payment. Follow these steps to make sure the gift funds are documented appropriately.

If you want to avoid gathering lots of paperwork, the donor can simply provide the exact amount of gift funds pledged in the gift letter directly to the closing Attorney. This will make things smoother for all parties involved and help reduce the amount of paperwork.

Gifting is a great way to help family members make the dream of home ownership happen. If you have any questions about gifting, our Mortgage Team can answer them and walk you through the process from start to finish. Contact our team online or call them at 256-882-8500. You can also drop your question in a comment below!

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You may qualify for down-payment assistance on your new home. Learn more to see if you qualify.

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