Receiving A Down Payment Gift, the Right Way
By Jeremy Hart
When buying a home, it can help a borrower’s purchasing power if they’re able to produce a down payment. In its simplest form, the more money a borrower is able to put down on a purchase, the less of a “risk” they are to the mortgage company who’s financing the rest.
Many times, the down payment comes from family members, which is a pretty awesome gift. But, it’s important to know just HOW to receive that money – it’s not as simple as Grandma writing you a check.
Dan Green of The Mortgage Reports has a great blog post on this, and I’d encourage you to head over and read it in its entirety. If you want the highlights, here goes:
Write a Gift Letter – this is a letter stating the amount of the gift, the relationship of the person giving the gift to the person receiving the gift, the property address, and that the money is a gift, not a loan, and will not be repaid.
What the Giftor needs to do – Keep a paper trail. Write the check, while photocopying everything and keeping duplicate copies.
What the Giftee needs to do – Take the check to the bank (Dan says don’t do a mobile deposit), deposit it, and keep the receipt.
Again, Dan’s post goes into great detail, both with the idea of using gift monies as a deposit, as well as what the tax consequences might be, and more. I’d encourage you to read it if you’re considering giving, or receiving, gift money in order to purchase a home.
Jeremy Hart is the Managing Broker of Nest Realty, New River Valley, and the 2014 NRVAR REALTOR of the Year. His interest are as varied as his expertise. Whether you just need to buy or sell home, or you want to learn more about your new community and how to get involved—give Jeremy a call, send him an email, or better yet, just stop him as you see him around town and say hi.