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Buying Your First Home

For many first time home buyers, saving up enough money for the down payment can be one of the hardest challenges to overcome. However, according to the National Association of Realtors, about 25% of first time home buyers use a large cash gift to help fund their down payment. A gift from your immediate family or relatives may be the key to purchasing your dream home.

When it comes to the down payment, loan program guidelines vary. Some programs are more strict about whether the money can be gifted or must be the borrower's own funds. That being said, there are programs that don't have any stipulations at all, (including no down payment options) so make sure to speak with your loan officer about your particular program and the down payment guidelines.

Using a down payment gift isn't impossible, in fact it's a common practice. There are a few steps you'll want to take in order to make it happen.

Start by asking family members. Gifts from your friends, neighbor, or co-workers are unacceptable (although in some cases employer gifts may be permitted). Gifts from your parents, siblings, grandparents, aunts and uncles are usually okay. Again, check with your loan officer before receiving any gifts.

Prepare a gift letter. The donor of the gift will need to sign a gift letter that your loan officer will provide. The letter must detail the amount of the donation, the address of the property you are purchasing, and the donor's relationship to you. It must also explicitly state that the money is a gift and requires no repayment.

Document the gift. You'll need to provide a papertrail (literal or virtual) for every step of the gift transaction. Typically this involves bank statements from the donor and/or wire transfer receipts. The guidelines for documentation can vary by loan program so make sure to coordinate the process with your loan officer.

The ability to buy a home is much easier when you have a little help, especially with gift funds. You can spend less time focusing on the details of the financing and more time finding the home of your dreams.

For more information on loan programs and down payments, please call us at (800) 461-4152 or fill out an application by clicking HERE.

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