Receiving & using a cash gift is one of the most common processes when purchasing a new home. Most forms of cash gifts are used for the 20% down payment.
We’ve provided a brief breakdown of the process and how to ensure you’re not denied from your lender due to in proper gifting.
Down payment “gifts” can make it easier to purchase a home.
First-time home buyers are most likely to receive a cash gift among all buyer types to make a 20% down payment.
You can often qualify for the lowest mortgage rates offered and with a 20% down payment, there is no requirement for PMI (Private Mortgage Insurance)
Mortgage limits are capped at $484,350 except within those high cost areas where homes exceed the national average
High Cost Areas are capped at $726,525 for single-family homes, and multi-unit homes.
Low-down-payment loans also allow cash gifts for down payment. (ie. as little as 3% down)
Down Payment Letter
There are 3 steps that should be taken in order to avoid denial from your lender:
- Correctly Written Gift Letter
- Documenting the Gift from the Giftor
- Documenting the Receipt of the Down Payment Gift
**There may be tax implications for givers of a cash gift for down payment and for the receivers. Everyone’s tax situation is different. Please consult a tax advisory for more information.**
If you have questions about a “Down Payment Gift.” Contact Us Today! We will be happy to walk you through the process.