There are numerous impediments to be conquered when buying a home. One of these impediments is the down payments on the new home. It is especially more difficult for first-time homebuyers because after securing a good loan with an even better monthly repayment system, the down payment could still prove to be very expensive. This article discusses an opportunity to help you ease the pressure of a down payment using Mortgage Gift Funds.
What Are Gift Funds?
Gift funds are the money you receive as a gift which you then use towards acquiring a home, either as a down payment or any other way. When you want to get a mortgage to acquire a new property, apart from agreeing to a monthly payment plan, you are still obligated to pay a down payment as the initial payment on the property. It is possible to receive monetary help from family and friends, which you can channel towards acquiring this property. This monetary help is called Gift Funds.
Who Cannot Give Gift Funds?
Since gift funds are gifts and should not be refunded or perceived as a loan, mortgage companies have put numerous rules in place to make the use of gift funds less complicated. With the guideline, it's easy to know who is eligible to give out gift funds and who cannot give out gift funds, depending heavily on the type of loan you apply for.
No matter the kind of loan you apply for, anyone that will benefit directly from the sale or purchase of the said property cannot give mortgage gift funds towards the acquisition of the property. Other people universally barred from giving gift funds include the following.
1. The Seller: It does not make sense financially or otherwise for the owner of a property looking to sell off the said property to give out gift funds for the purchase of their property.
2. Mortgage Broker/Escrow Agent: When a mortgage broker or an escrow agent is trying to give mortgage gift funds to one of their clients, it can be seen as illegal because a mortgage gift fund is supposed to be a gift without a repayment plan.
3. A Real Estate Agent: When a real estate agent, either for the seller or the buyer, gives gift funds, it can seem like they are trying to expedite the purchase or sale of the property.
Who Can Give Gift Funds And Who Can Receive Them?
The giver and recipient of mortgage gift funds are determined by the kind of loan you apply for:
USDVA And USDA Loans
The United States Department of Veterans Affairs home loan program is basically for United States Military veterans. This type of loan program, as well as the ones offered by the United States Department of Agriculture, has the least restrictions on who can give or receive mortgage gift funds as long as they do not benefit directly from the purchase or sale of the property.
This is a loan system offered by private loan companies. Their loans are completely independent of the U.S government, and they have the strictest rules. You are only allowed to receive gift funds from people you are related to either by blood or marriage or by legal processes.
Mortgage gift funds are a welcome relief to help you ease the pressure of owning your own property. However, you should consider consulting with your lender or mortgage bank before accepting gift funds.