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 Homebuyer'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.
