The minimum requirements for down payments are on a rise, with the lenders tightening the mortgage guidelines for Mason OH home buyers. A few years ago, you could easily finance a home without a down payment. But, today, at least 10 percent is demanded by most of the conventional mortgages.
Anecdotally, the changes in the guidelines have led to an increase in the number of home buyers who accept cash gifts from family.
In most cases, gifts are allowed, but the problem is that if the gift is not accepted in a “lender-friendly” way, then the mortgage underwriter might reject it and also negate it.
You are required to follow a series of steps and keep records as you cannot just deposit cash into your bank account. The following are a few of the steps you are supposed to follow:
- An acceptable gift letter is to be provided which has been signed by all parties.
- A documentation of the gifter’s withdrawal of funds is to be provided via teller receipts.
- The teller receipts are to provide documentation of the giftee’s deposit of funds.
The above 3 steps are required for Cincinnati home mortage lenders for two reasons. First, they would want to make sure that the gift is not illegal. Secondly, they want to be certain that the gift is really a gift and not a loan-in-disguise.
This is the reason why lenders make sure that a signed, dated letter is submitted along with the loan application.
For instance:
I am the [relationship to recipient] of [name of recipient] and this letter serves as verification that I am gifting [name of recipient] [amount of gift] to be used for the purchase of the home at [complete address of property].
There is no expectation of repayment; for this is a gift and not a loan.
Signed,
[Signature of gifter]
As an additional step, at the time of deposit, home buyers receiving the cash gifts should make sure that the gifted funds are not commingled. The bank’s deposit slip should indicate that only $10,000 deposit was made if the cash deposit was $10,000. You should not add a random $100 deposit to the transaction. In other words, the $100 transaction should be a separate transaction.
You should also realize that gifting funds between family members can create both legal and tax liabilities. You can call an attorney or an accountant if you are not sure about how to donate or receive a gift. If they are of no help, then a real estate agent can refer you to somebody who might be able to help out.