Wednesday, October 5, 2011

Quoted in USA Today article -- about buyers who receive downpayment "gift" funds from family members...

If you follow me on Twitter or Facebook, you will already know that a couple weeks ago I was interviewed by a USA Today reporter about my experiences with buyers who receive monetary "gifts" from family members toward a home purchase -- usually for a mortgage downpayment or closing costs.

Well the article was on the front page of today's edition of USA Today! Kinda neat...the couple that I refer to in the article bought a nicely remodeled 4 bedroom house in Sacramento in a revitalized area. They were married a few years ago, the husband had just graduated from law school, they just had their first child, and relocated here from San Diego for employment. They were paying $1200 per month in rent for a 2 bedroom house just a few miles away from the home they purchased. Their total mortgage payment is about $250 less than the rent they were paying.

I would estimate that 1 out of 4 of the buyers I work with receives gift funds, usually from a parent. These financial gifts generally do not constitute the entire downpayment, or all of the cash needed to make the home purchase. What I typically see is mom and dad (or a sister, uncle, grandparent, etc.) will gift a few thousand dollars to augment the downpayment from the buyer.

If you are giving or receiving a financial gift to make a purchase, there are a few things you should do BEFORE any money changes hands. I would highly suggest NOT just writing your kids a check...the funds must be "sourced and seasoned." This essentially means that the lender must be able to verify who the funds came from, what their relationship with the buyer is, from what account the money came from, how long the money had been in the account, and how the funds were earned. There are some easy ways to do this, but speak with a loan officer might make a well-intentioned gift but delay or adversely affect the buyer's loan underwriting. If you have any questions about this, or need to speak with a good loan officer, just contact me and I can assist.

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