You know how slow it can feel to save for a down payment—and how happy you'd be with help. But it's tricky to make sure a gift of money doesn't interfere with getting the home—and the mortgage—you want.
It's possible that if there's even a tiny suggestion the money is a loan instead of a gift, it could prevent you from getting a mortgage at all. Or it might be included in your own debt load and raise your mortgage interest rate.
We offer some steps below that you can take now. But the best advice is to talk with me. There are other requirements that need explanation, such as who exactly can give you a gift and how much of their resources they can give. We at Trillium have the experience and know-how to ensure your joyful gift stays joyful.
4 actions to take with a down payment gift
1. You must document that it's truly a gift.
You need to get a gift letter from the giver. There are sample letters online that you can download. Here's an editable letter, a PDF letter and another sample. We also have forms in our office for this step.
2. Keep the gift at $14,000 or less.
That amount is the "annual exclusion," what one person can give another without it being taxable. More than that is taxable. Of course it's possible to get more than one gift as long as it's from different people—say, each parent or two siblings.
3. You have to verify the funds—and so does the giftor.
Both you and the gift-giver should be prepared to turn over your financial information to your lender. You need prove where the money came from and they need to show where it went.
4. It's best to get the gift way ahead of time.
Your lender will be happiest if the money has been sitting in your account for a while. Both you and the gift-giver will have already verified the funds, but it appears more trustworthy if it's not last-minute.
- Down Payment Gift Money for First Time and Repeat Home Buyers
- How to Receive a Cash Gift For a Down Payment