There's nothing better than giving or receiving the gift of a down-payment for a home purchase and this is the perfect time of year to take advantage of potential tax benefits. If you are thinking of gifting someone with a down payment this holiday or you are going to receive a down-payment gift, here is some helpful information.
Before you give or receive the gift of a down payment, please be aware:
- Receive the money as a check or wire transfer versus cash.The gift needs to have a paper trail.
- You will need to provide a gift letter, including: the amount of gift, the relationship of the giver to the borrower, and that re-payment is not required.
- Deposit the gift funds a few months prior to applying for the loan to avoid questions.
- Make sure the gift giver knows the tax laws-cash gifts of over$13,000 are subject to taxes and must be reported to the IRS.
- Depending on the loan type, there may be restrictions on how much of the down payment can be a gift. In many instances,gift funds are allowed for up to 100% of the down payment,but it does vary based on loan parameters. Federal Housing Authority (FHA) loans, popular among first time home-buyers do not have any limits on gift amounts to cover the down-payment. Check with your lender to clarify.
December, January, and February are a great time to make a deal on a new home. Sellers who have their houses for sale during the winter months are generally motivated to move on and you l have less competition from other buyers. See what's for sale at http://www.marilynmessenger.com.