“Gifting” Isn’t Just For The Holidays
December 23, 2011This time of year, everyone seems focused on giving or receiving gifts. In mortgage world, “gifting” occurs all year long.
When it comes to gifting for a home purchase, there are many more details to unwrap beyond a simple ribbon and paper.
First-time home buyers may find challenges in coming up with down payment money and closing costs. Many of them may turn to relatives and fiends for a little help.
Although there are some mortgage programs available which require little or no money to buy a home, buyers can still expect to front some cash when making a home purchase.
Gifting is a process when homebuyers receive a cash gift for the purpose of purchasing a home with no expectations of repayment. Generally speaking, a buyer cannot borrow funds for the down payment or closings costs associated with purchasing a home.
When using a gift as a down payment, it’s important that proper documentation is provided. The process is called, “sourced and seasoned.” This simply means that proof of where the funds came from will be required as well as proof the funds were gifted to the buyer and deposited in their bank account in a reasonable time period prior to the settlement date. The gifting party will also need to sign a legal document stating the funds were given as a gift and that there is no expectation of repayment.
As a home buyer, it is important to disclose to your mortgage lender early in the process if any funds associated with your purchase transaction will be gifted. As a mortgage professional, you may want to ask your client if any funds will be gifted.
Gifting is a great tool to help buyers who may be short of funds to become homeowners. The key to utilizing this resource is full disclosure. Any attempt to no disclose funds that are gifted could constitute mortgage fraud and may be punishable by law.
Following the proper guidelines for gifting can benefit home buyers during the holiday season and all year long.
Happy Holidays!
Have more questions? Call me!
Guaranteed Home Mortgage is a Direct Lender licensed by the PA Dept. of Banking
Dan Ranck
Guaranteed Home Mortgage Company, Inc.
5513 Main Street
East Petersburg,PA17520
Telephone 717-271-2400
Toll-Free 1-888-566-1795
Fax 1-888-275-8495
NMLS # 140989
