Gellman Real Estate News: February 2024

by Brad Gellman

What to Know About Down Payment Gifts

I hope everyone had a wonderful Valentine’s Day! Since the spring market is about to start and people are getting ready to start buying homes again, I want to talk about different ways to help with the costs of financing a house. This month, we’re focusing on “Gift Money” when purchasing a home with a loan.

There are many rules and regulations when buying a home through a lender. For example, your lender needs to know the source of your down payment money. If you are considering giving or receiving any down payment assistance, here's a breakdown of common rules and requirements.

What Are Down Payment Gifts?

A down payment gift is money that a buyer receives from someone else to use toward a down payment or closing costs during a home purchase. Down payment gifts do not need to be paid back.

Gift Rules and Gift Letters

Different loan types have different restrictions on who can provide financial gifts, how those gifts can be used, and how they need to be documented. Regardless of loan type, most lenders require a gift letter that documents the details of who is gifting the money, what their relationship is to the buyer, and how much is being given. This letter also states that money does not need to be repaid and must be signed by the donor. Verification of sufficient funds and documentation of fund transfer is often required, as well.

Most loans are Conventional, FHA, and VA. Each one of these loan types have different rules and regulations for these gifts. If you are considering using a financial gift to purchase a home, speak with your lender about their gift rules before applying. If you haven’t spoken to a lender yet, please reach out as I have a few amazing Lenders that I highly recommend. Next month we are going to discuss some of the potential loan programs to help you save as much money as possible.

The Gellman Team
Coldwell Banker Realty
325 Chestnut St. Suite 1300
Philadelphia, PA 19106
P: 267.259.0134
E: brad.gellman@cbpref.com

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