gifting money for a house?

Question by poesgirl17: gifting money for a house?
I want to buy my sisters house. I have vaguely heard about “gifting”. She offered to gift us 20,000 so we don’t have to come up with the down payment but is worried that I will have to hold that money in my account for too long. How does this work? Is it phantom money or does there have to be a paper trail linking it to me and if so how long do I have to hold it for. She’s harping on me for details and I can’t find the answers. Can anyone help me?

Best answer:

Answer by Kenneth D
Family members can do a gift of equity. Talk to your mortgage broker. It is a simple process and no cash has to exchange hands.

***ADD: FNMA and HUD guidelines both allow for a gift of equity. Most banks follow these guidelines for conventional loans as well.

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4 Responses to gifting money for a house?

  1. Michael S on February 19, 2012 at 1:17 pm

    You should talk to a mortgage loan officer, but usually when someone is gifted funds for a home purchase, the mortgage company wants a paper trail and sometimes the funds even have to be “seasoned” which means they would have to be in the account for a certain amount of time (ie: seasoned for 2 months, etc…) . In some instances it is even possible that the mortgage company will want a “gift letter” from your sister (just her basically saying that she is gifting the funds to you) and they may also want a paper trail from her too (to see where they came from).

    You should speak with a loan officer from your area who knows the laws in your state and get the complete details from the professional in that field.

  2. Mr_Blue_Eyes_27 on February 19, 2012 at 1:35 pm

    The underwriter will want to see evidence of the source of the money. You will need a notarized letter from your sister stating that the money is a gift that does not have to be paid back. Your loan officer/broker should be able to provide this information to you. She does not have to give you the money for a lengthy period of time. The broker will want two months of bank statements and explanations for any large deposits or withdrawals over that time.

  3. steffie on February 19, 2012 at 1:44 pm

    I got the below information off of the Well Fargo site. Most of time the family member just has to sign a Gift letter. If your sister wants to give you a gift in the form of a check just make sure you make a copies of the front and back of it and you will have indicate it on your bank statement when you provide the lender with the required documents.

    Gift funds
    If your funds for a down payment or closing costs are low, family members (such as parents, siblings, or grandparents), who are financially able and willing may be able to help.
    One of the most common ways they can help is by providing you with money in the form of a “gift” you can use toward your closing costs or down payment.
    In most instances, a relative of the borrower or a qualified organization must be the source of gift funds to be used toward a home purchase. To assure the lender that you aren’t, in fact, just taking on an additional loan and adding potential debt, the donor signs a document stating the money is a gift that you won’t be repaying.
    This may be very helpful toward covering the down payment or closing costs, although, you should check your loan’s requirements to make sure gift funds are permitted, and what limitations, if any, exist on how much can be contributed and how those funds can be used. Because of restrictions on how much money donors can provide as a tax-free gift, a tax advisor should be consulted.

  4. Adam T. Hurd on February 19, 2012 at 2:36 pm

    It is factored into the purchase it never touches your account.

    I’m a seinor loan officer with North Star Mortgage.

    Call me @ 516-472-7200 ext. 303

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