Gift Funds & Your Arizona Home Loan

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No such thing as a free lunch right?   Yes, well except when we are talking about getting a gift toward your Arizona home purchase.   Many homebuyer’s in Arizona utilize funds from their own asset accounts – their own savings – when purchasing a home.  However, there are quite a quite a few Arizona homebuyers that want to buy a house that do not have enough money in their own accounts for a down payment.  Instead of using their own funds, they get a gift for their down payment.

The two questions that always come up in a gifting situation are “who can give me a gift?” and “how much of a gift can I receive?”  Most people worry that mortgage regulations will not allow them to receive gift funds.  Have no fear, getting a gift for a down payment and/or closing costs is much easier and permissible than many think.

Who Can Gift Money for a Home Loan Down Payment?

When it comes to who can give a gift, the rules are pretty straight forward and unilateral whether you are considering an FHA, VA, USDA or Conventional Loan.   The gift donor must be an interested party which typically translates to a family member.  Someone that is not family that has a long-standing relationship with a buyer (or even a fiance or significant other that is not a spouse) can also donate gift funds so long as the relationship between the donor and recipient can be clearly documented and typically that individual will need to plan on occupying the new property as well (exceptions do exist).

How Much Can One Gift on a Home Loan?

A gift can be given in any amount toward down payment and closing costs on primary residence and second home transactions.  Older (and outdated) mortgage and mortgage insurance rules previously required that in certain cases a borrower have a specific amount of their own non-gift money in the bank if they were receiving a gift when using a Conventional loan.   Now, that is no longer the case.  A borrower using an FHA, VA, USDA or Conventional loan can receive a gift toward their new home purchase in any amount for a primary residence or second home purchase (only Conventional loans allow second home purchases).  Gift funds are not allowed on an investment property purchase.

Getting a gift is a relative simple process from a paperwork standpoint.  Your mortgage lender can walk you through each of the steps associated with  documenting a gift.  Please let us know if you have any gift questions!

By Jeremy House

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