Your parents can gift the money for the down payment and closing costs.(FHA loan)
When you purchase, you can negotiate that the Seller offer a concession of $x,000.(Legally up to 6% - however may be reduced to 3% in 2010)
This money can be used toward closing costs, or toward discount points to reduce your interest rate:
A.) permanently for the life of the loan or
B.) Temporarily Ex. 2-1 Temporary Buydown
Your start rate would be:
3.25% (Year 1) then
4.25% (Year 2) then
5.25% until you sell, refinance or pay it off.
Know your options...Good Luck!
You can calculate rates, payments and savings at:
If your parents cannot show US Income tax returns, then they can only gift you the down payment.
You can have another non-occupying co-borrower OTHER than your parents co-sign for you AND still receive the gift from your parents if you wish. That may solve your problem.
You can also use your parents gift to buy-down your interest rate, thus lowering your payment and helping you improve your debt ratio.
Lastly, if you have debts in your name other than a mortgage, your parents can pay those off for you, which will also improve your overall debt ratio.
Your parents, US Citizen, foreign nationals, whatever... does not matter. They can simply gift the funds to you for the downpayment, as long as 5% of the downpayment comes from your own pocket. That's it...
At Wells Fargo, as long as the funds are gifted prior to the application, then we just need the gift letter. If the gifts were given after the start of the application, then we need a letter from the bank that the funds come from and documentations that the funds were transferred into your account. Of course, every bank does it a little different.
Hope that helps!
I have dealt this many times where parents, for example, from China gifting funds for down payment/closing cost. It's a simple process. There are a few ways to handle this but they all invovled documentations of the gift funds from the originating country. If you like, please call me at 408-772-2921 and I'll be more than happy to provide all the details.
Home Mortgage Consultant
Wells Fargo Home Mortgage
2160 Tully Rd
San Jose, CA 95122
What's amazing is that the guidelines that exist for FHA and conventional loans now allow qualified borrowers to still get a loan under unique circumstances.
Instead of giving borrowers stated income loans with higher scores, the borrower find a co-signor until they can qualify on their own and refinance. Loan has more risk, add another person to eliminate risk. Simple.
Of course, it's not that easy, but it is a "make sense' solution.
With my current savings and income, I'm not sure if it's enough to qualify for the mortgage without putting down a large down payment. We are more inclined to put down about 20% downpayment, and borrowing the rest.
I guess Keane's suggestion applies if my parents have an SSN? And since they don't, only the downpayment portion need apply to us?
Terri, do you mean to say if I'm able to prove my parents' the financial health, it's possible for me to borrow more than I can with just my own credit and income?
Once the lender advises you on how to structure the financing, I would suggest the parties also put in writing how the purchasing partnership is structured. In the event of sale, death, etc., how will the payback and equity/loss be accounted for.
Select a real estate agent as well to assist with your search and closing.
If they do not, they may only be able to help you qualify for the down payment.
DOWN PAYMENT GIFT
On a conventional loan, they either must gift you 20% of the down payment OR if they gift less than 20%, you must contribute at least 5% of a down payment from your own funds
On a FHA loan, there is no limit to gifted funds and the down payment requirement is only 3.5%. They can gift the entire amount.
A Non-occupying co-borrower is a co-signor that helps you qualify by including credit tradelines to help you meet a minimum tradeline requirement and can be used for income without agreeing to move in the home.
CONVENTIONAL NON-OCCUPYING CO-BORROWER
Only Freddie Mac allows non-occupying co-borrowers for conventional loans. You cannot use a non-occupying co-borrower for Fannie Mae loans. A mix of both borrower's income and credit will be used to qualify.
FHA NON-OCCUPYING CO-BORROWER
FHA also allows a non-occupying co-borrower. Again, a mixture of both borrower's credit and income will be used for qualifying purposes.