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©
2002 Ruth E. Campbell. |
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Frequently Asked Questions Mortgages
- Q & A Q: Do I have to disclose a parent's gift?
A: Having generous parents is nothing to hide. An estimated
one-third of first-time buyers purchase their home with a loan
or a money gift from their parents. Lenders will ask for a gift letter stating that no repayment
of the "gift" is expected. In addition to the letter,
a lender can ask for two or three months' worth of statements
for the account where the down payment funds are located. If
the money was recently placed into that account, the lender
may ask where it came from and request verification of that
source as well. Resources: * "The home buyer's Survival Guide," Kenneth
W. Edwards, Dearborn Financial Publishing, Chicago; 1994. Q: What is a gift letter?
A: If someone is willing to make a gift of funds in
order for you to purchase a home, lenders will ask for a gift
letter stating that no repayment of the "gift" is
expected. The amount of the gift and the date funds were transferred
should be spelled out in the letter, along with the donor's
name, address, telephone number and relationship to the borrower. In addition to the letter, a lender can ask for two or three
months' worth of statements for the account where the down payment
funds are located. If the money was recently placed into that
account, the lender may ask where it came from and request verification
of that source as well. Gifts -- with the proper documentation -- can be from relatives,
friends, an employer, church, municipality, or nonprofit organization.
Lenders often have stricter restrictions on gifts from friends
and relatives other than parents. Also, if you put less than 20 percent down, some lenders may
require that a portion of the down payment be your own cash,
not a gift. If you want to use a gift as part of your down payment,
check with individual lenders to learn the restrictions of specific
private or government-insured mortgage programs. |