Millennial home buyers are getting cash gifts to help buy homes. If you’re among them, follow your lender’s cash gift for down payment rules.
According to the National Association of REALTORS® 2018 Buyer and Seller Generational Trends Report, 23 percent of Millennial buyers received gift money to help with a down payment last year.
Depending on the mortgage loan program, buyers are permitted to receive all of their down payment monies as a gift; or, just a portion.
FHA down payments can be made up of gifts entirely. Conventional loan down payments cannot. With all loans, though, documentation of the gift equity is key.
Your lender will want a paper trail.
- Where did the money come from? Get receipts from the giver.
- How did it get to your account? Save receipts from the deposit.
- Who gave the gift to you? Document with a gift letter.
A gift letter is a document showing who gave the gift, who received the gift, and how much money changed hands. It includes a statement that the gift is actually a gift and not a loan that’s in disguise; and signatures from all parties.
Lenders reserve the right to reject cash gifts and they’ll do that when gift documentation is lax.
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