I. I Mentioned Last Week That 100% of a Buyer’s Down Payment Can Be Gift Funds. I Had Several Questions in Response, so I Thought I’d Share a Few Reminders.
1. Who Can Gift?
A. For Fannie, Freddie, and Jumbo, it needs to be a family member, domestic partner, or a fiancé. Family member extends to grandparents, aunts, uncles, and cousins, and I have yet to see relationships closely verified.
B. FHA is much more flexible. Gifts can come from family, domestic partners, and fiancés, but also from friends, employers, unions, down payment assistance programs, and the neighbor’s dog… (OK, maybe not the dog, but FHA is very flexible!)
2. Who Cannot Gift? “Interested Parties” can’t gift. This includes builders, real estate agents, lenders, and sellers.
Note: This is why lenders do not allow excess closing cost credits (that exceed actual closing costs) to be applied to down payments.
3. Interested Party Gift Exception: Gift of Equity. When one family member sells a home to another family member, lenders allow the seller to “gift equity” to the buyer – and that equity can serve as a down payment (even though no cash exchanged hands).
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