How to Accept a Downpayment Gift from Family the Right Way
Due to the subprime mortgage meltdown and rampant foreclosures in some parts of the country, lenders have tightened lending guidelines. One of the lasting impacts on San Mateo home buyers are the larger downpayments required to purchase a home with both conventional and FHA financing. Lenders want to see buyers put up a greater portion of their own money in hopes they will think twice before defaulting on their mortgage loan.
First Time Home Buyers Have a Lot Going for Them
With the $8,000 first time home buyer tax credit, low mortgage rates and San Mateo County homes at some of the most affordable levels in history, there are a lot of first time home buyers wanting to take advantage of these incentives before the end of the year. But, not every buyer has the money for a downpayment. A lot of my clients are going to their family members to help them come up with some cash so they become homeowners.
Is a Downpayment Gift Part of Your Home Buying Strategy?
If a downpayment gift is part of your San Mateo home buying strategy, there is a right way and a wrong way to go about it. You cannot just deposit money from your parent’s account to your bank account if you want to make it past underwriting (the person at the bank who decides whether or not you will be approved for the mortgage loan).
How Do You Take a Downpayment Gift the Right Way?
Taking a gift is a three step process. It is imperative you follow every step to the letter. If not, the underwriter may not accept your gift funds as a source of downpayment.
Step #1: The Gift Letter
Complete and sign an acceptable Downpayment Gift Letter. An acceptable Downpayment Gift Letter will include the following information:
- The amount of the gift
- The property address
- The relationship of the gifter to the giftee
- States the gift is in fact a gift, not a loan
- Dated and signed by all parties
I have a template I give to my clients to ensure all of the pertinent information is included. If you need one, fill out the form below and it will be automatically sent to your email.
cforms contact form by delicious:days
Step 2: Leave a Paper Trail
Not only is it important to have the gift letter in place, the underwriter also wants to see a trail of money from one account to another. Wire receipt and a certified check deposit are both acceptable forms. However, a certified check is preferable because all it takes to document is a teller receipt. Make sure the gifter gets a receipt for the check being drawn. The giftee needs to have a deposit receipt with that exact amount to close the loop.
If you prefer to use a wire, you will need to provide a copy of the wire from the donor. This wire has to show that it is from the same account and donor that is documented on the gift letter. You must also show your bank statement showing that you have received the wire into your account for the exact funds.
Step #3: Accept the Gift As-Is
What does this mean? The giftee needs to deposit the gift funds with a live person in the branch (if the gift is via a certified check). The deposit should stand alone (don’t include any other checks or cash with the deposit). This will allow the underwriter to see a clean, strong paper trail.
What Can You Afford?
Don’t let a few unaswered questions keep you from owning a home in 2009! Call or email me today to set up a phone or in person consultation. I’ll look over your financials and help you determine what you can afford.
Need a Referral for a Top Notch Real Estate Agent?
I can introduce you to a knowledageable real estate professional in your area who will make the home buying process seem easy! Just send me an email with the areas you’re considering and I’ll send you their name.
Other Posts You May Enjoy
- Can I Use Tax Credit Money for a Down Payment?
- How Mortgage Interest Rates Affect Your Monthly Payment
- What Mortgage Can I Afford?
- What Mortgage Can I Afford with FHA?
- The CIA of Lending Series
Enjoyed this Post? Why Not Subscribe?
If you have enjoyed San Mateo Mortgage Blog, please subscribe to our RSS feed.
Chris Williamson is a Mortgage Advisor with Mortgage California specializing in San Mateo Mortgage.
Related posts:
