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Philly Urban Living

Philly Urban Living - Local | Real Estate | News | Development

By Timothy M. Garrity | Broker in Philadelphia, PA

Gifts are Good

What kind of gifts am I speaking of? Down payment assistance gifts, of course.

If you're not quite sure what a "gift" is, please allow me to elaborate. A gift is financial assistance from a blood relative acquired by the buyer(s) to purchase a home, and it cannot be paid back. In other words, it's relatives helping relatives with down payments for buying homes. When purchasing a home, most people typically need a mortgage to go along with that purchase. Since this is the case, mortgage companies have guidelines to classify buyers as financially creditable (or not). Things such as credit/job history and asset verification are mandatory first steps that all lenders take to make a case for your purchase. The latter being one of the most important.

In the past, all Freddie/Fannie insured mortgages required the buyer(s) to contribute 5% of his/her own money to the total purchase cost. This 5% would have to come from a personal bank account, investment account, etc. Freddie Mac (cousin of Fannie Mae) is now considering new guidelines for gift funds when purchasing a primary residence/single family home. Instead of requiring a mandatory 5% contribution directly from the buyer(s), they may now allow this minimum to come from a gift.

FHA currently allows for such a situation to occur, but their guidelines are more strict these days; especially for condos. Feel free to read more about this latest piece of encouraging financial news.

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