Good Morning!
If you wanted a Conventional Loan, and you were thinking of trying to use a gift for down payment or to help with closing costs – here are some guidelines you need to be aware of…
The gift can only be provided by…
A relative, defined as the borrower’s spouse, child, or other dependent, or by any other individual who is related to the borrower by blood, marriage, adoption, or legal guardianship; or a fiancé, fiancée, or domestic partner.
Amount of gift…
If loan to value ratio is 80% or less (putting down at least 20%) then entire down payment can be a gift! This would be on owner occupied 1 to 4 family homes.
If loan to value ratio is 80% or higher then entire down payment can be a gift! …This would apply to a one unit principal residence.
If buying a 2 to 4 unit home and the LTV is over 80% then 5% of the down payment must come from borrower’s own funds. The remaining funds can come from a gift for additional down or help with closing costs or reserves.
Documentation Requirements for a gift…
Gifts must be evidenced by a letter signed by the donor, called a gift letter. The gift letter must:
· specify the dollar amount of the gift;
· specify the date the funds were transferred;
· include the donor’s statement that no repayment is expected; and
· indicate the donor’s name, address, telephone number, and relationship to the borrower.
Remember the main benefit of using a Conventional Loan over FHA is that there is no upfront mortgage insurance payment!
I hope you have a great day! Thanks for reading!
Brett
Do you need cash out of your home, but you don’t want to refinance the…
I wanted to address the two most common questions that I get regarding reverse mortgages……
Do you need cash out of your home, but you don’t want to refinance the…
Would you like to get cash out of your home, but you don't want to…
If you need cash out of your house, but don't want to touch your first…
I wanted to address the two most common questions that I get regarding reverse mortgages……