The good news is that FHA allows for the down payment to be a gift. The Gift funds must come from a "person you have demonstrated a relationship with." Can FHA Gift Funds Come From A Spouse? Well, a current or previous spouse can "gift" the money for a FHA loan. The other "trick" is that the money for the Gift Funds must be sourced.
A "Gifted" Down Payment is very common for first time buyers. Essentially, a buyer’s family member (usually very nice, warm and loving parents) will offer up money to go towards the down payment. Often this is done because their son or daughter doesn’t quite have enough funds saved up for the full 5% down payment.
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A monetary gift toward a down payment can help you qualify for a mortgage, get a lower interest rate and, if it allows you to put at least 20 percent down, avoid paying for private mortgage insurance (pmi). If you’re fortunate enough to receive such help, just make sure you follow the correct guidelines so that everything goes smoothly.
Down payment funds may also come from someone else in the form of a gift, so long as that gift and the giver meet certain FHA requirements. In order to establish whether a particular gift of down payment money is permitted, we have to examine what the FHA describes as a bona fide gift.
But before you do this, realize that the interest rate on the small mortgage serving as your down payment will probably be higher than the rate on your "real" mortgage. There are other creative ways.
Restrictions on Down Payment Gifts How much money you’re eligible to receive as a down payment gift depends on the type of mortgage you’re borrowing. If you’re taking out a conventional loan – which means one that’s backed by Fannie Mae or Freddie Mac – all of your down payment can be gifted if you’re putting down 20% or more.
Before gifting money for a down payment, it’s a good idea to consult a certified public accountant to discuss how this might impact your taxes and other aspects of your finances. The homebuyer should also find out if the lender requires a certain amount of the down payment to come from the buyer and ask about documentation requirements.
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