Homeowners!!! It's time to apply for your property tax exemptions for 2019. For those who qualify, this is the perfect
Can I Use Gift Funds for My Downpayment?
Are you considering gift funds to assist with your downpayment? Meaning, your parents, aunt or cousin plans to provide money to assist with your downpayment. Which is awesome by the way. If so, there are some things to consider. It's not as simple as someone depositing money into your account and you are using the funds for the downpayment. The funds have to meet the requirements of the US Department of Housing and Urban Development (HUD).
- Your funds have to come from an approved "donor" as defined by HUD. Which includes family members, an employer or other approved donor.
- You may be required to prove that your donor family member is in fact family
- Your lender will want to confirm that the funds are in fact a gift and not a loan. Loans will change your debt to income ratio and may change your mortgage eligibility.
- The donor may be required to write a gift letter. It's a very simple and straightforward letter than simple outlines that they're giving you x amount of money as a gift for the downpayment on your home.
- There needs to be a paper trail (or electronic trail). Meaning, the lender will need to see the money leaving the donors account and entering your account. This is done with bank statements, proof of wire transfer, a copy of the check and/or bank withdrawal or deposit slips.
- If you wish to use gift funds for the total amount of the downpayment you're free to do so.
- The IRS doesn't require you to report or pay income taxes on gift funds.
- The donor may be able to claim the amount as an exemption on his/her taxes.
Candace Montgomery is a real estate agent in the greater Chicagoland area. Born and raised on the south side of Chicago, Candace has a particular affinity to the historic Bronzeville neighborhood. P....