Giving the Gift of Homeownership

As the gift-giving season draws closer, you can turn the generosity of loved ones into a home through the magic of gift funds. Most loan programs allow borrowers to use gift funds toward their down payment, though the particulars depend on the loan program. If you're struggling to come up with all the necessary cash to close, a Christmas "gift" might be exactly what you need.

FHA Loans and Gifts

These loans offer great flexibility when it comes to the gift source. Whereas other programs require some familial or marital connection to the buyer, FHA will allow for funds from family and:

• The borrower's employer or labor union.
• A close friend with a clearly defined and documented interest in the borrower.
• A charitable organization.
• A governmental agency or public entity that has a program providing homeownership assistance to low- and moderate-income families, or first-time homebuyers.

Additionally, FHA allows your entire down payment to come from gift funds. Your down payment can be covered as long as your credit score is above a certain amount. One thing to keep in mind, however, is that gift funds can only be used on primary residences.

Conventional Loans and Gifts

Even if you're pursuing conventional financing, a last minute holiday check could still be used to purchase a home.

• The gift source must be a relative, spouse or domestic partner.
• There are limits on how much the gift can be, but the entire down payment can be a gift if the amount is large enough.
• Gift money can only be used on primary residence and second homes.

VA and USDA

VA and USDA also accept gift funds! They must come from a family member. Because they are 100% financing, there is no limit on the amount of the gift. Keep in mind, gift funds in all cases will need to be documented. If you know you are about to receive a holiday infusion of cash, doing so by check is the easiest and often most convenient way to satisfy the lender.

If you have questions about gift funds, contact us today. As always, we're here to serve you. Happy holidays from everyone at PRM!