The Home Buyer's Korner

Information presented should be used for educational purposes only.

January 2nd, 2014

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Down Payment Requirements for a Home

When you already have a home you don’t need to worry about restrictions on down payments or some of the issues many home buyers face documenting a down payment and understanding down payment restrictions are important!

USDA Rural Development and VA Home Loans don’t require down payments and FHA only requires 3.5 percent down, while FNMA offers a first time home buyer program with just three percent down to qualify for a mortgage. 

Generally speaking, the lender will require the gift giver to be a relative or someone who has a vital interest in your well-being like a family member or close friend, your employer, church organization, or fiancé to name a few.

When providing a gift the donor will have to provide a letter stating the amount of the gift and that it does not require repayment.  They also might have to provide evidence of their ability to provide the gift, such as their current bank statement and a copy of their cashier check along with your deposit slip.  Be sure to talk with your loan officer as to what documents you’ll need to provide when using a gift as your down payment.

Often time’s newlyweds ask for money as a wedding gift for their down payment and it’s completely acceptable, but you’ll still need to document where the money came from. You’ll most likely need to provide your lenders with your marriage certificate and a deposit slip for all cash gifts closely dating your marriage. When doing this, make sure you list all your gift givers separately along with the amount given on the back of your deposit slip.  It might seem like a lot to do, but you’ll want to send a thank you note to your gift givers and keeping track this way can accomplish documenting the down payments and who you need to thank.  

If you hit the lottery or come into money through an inheritance, one of the first things most renters consider is buying a new home. However, it is important to keep in mind that lenders will typically want to know exactly how you came up with your down payment.  You’ll still need to show a paper trail, so keep detailed records.  Otherwise the lender may not accept your source of funds for the down payment and that could prevent you from getting your home loan.

Lender restrictions on down payment funds are fairly common. If you are uncertain if your funds meet your lender’s criteria, talk to your loan officer early in the loan application process. Keep in mind, lenders many have different requirements and not discussing the down payment early can leave you disappointed.

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