Fungirl, Home Buyer in Washington, DC

Gift for Home purchase

Asked by Fungirl, Washington, DC Sat May 21, 2011

About a year ago a very close friend of my mine who I have been knowing for over 30 years mother passed away. She sold the home that her mother had which was on Capital Hill for $425.000 about a year later which was paid for years ago. The house need so much work done on it. She recently purchase a home and paid $90,000 cash for it. She wants to help me with my down payment for a purchase of a home. My question is what proof would I need to show that the money was a gift from her and not a loan. She can very easily show where she sold her mothers home, paid cash for the home she is in now and that the money she wants to gift to me came from her banking account. She keeps asking me over and over when am I going to start looking at some houses. I just don't want her to come back later and say it was a loan. So what proof do I need that my down payment is a gift from her. She told me that she will just give me a cashiers check for $5000 to deposit into my account. Now I need a realtor

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If you put the money into your bank account and wait at least four months to apply for a mortage that money will be "seasoned" and you will not need to document where is came from for mortgage purposes. As far as your friend coming back and saying it was a loan, I agree that you should get a statement in writing and also have her write "gift" on the check's memo line.
0 votes Thank Flag Link Sat May 21, 2011
You need to establish a family or long term friend status for this person, you need a letter from them also stating that this money is in fact a gift, But because of the amount given it will also require a 1099 at end of year. Talk to a good CPA about all items involved in gifting. Once you have established the gift and its qualifications, then you can introduce it to the closing.
0 votes Thank Flag Link Sat May 21, 2011
Most of the answers have it right especially Shane's. We used a HS yearbook once to prove the relationship once to build the case. Different rules also on gifts depending on FHA vs conv so keep that in mind also. IMO you need to finalize ALL parts of the loan first and then go get the realtor. Have you picked a loan officer yet? Do that and make sure you ask what FTHB programs they have to help with the down payment and closing costs. If you need a realtor I have seen all types and can give you a few names to see the best fit. Hope this helps.
0 votes Thank Flag Link Sat May 21, 2011
In addition the gift letter - you are also going to have to document that you have a long standing close relationship to this person - as gift funds are only permitted to be provided by family or someone who has had a long standing close relationship. It is tough to document - but one way to do so is by putting together a mini photo album of pictures of yourselves together, provide a copy of valid photo ID to confirm that is your friend in the picture with you, and you'd also have to write a letter explaining your relationship. I've had to do this a few times before, it isn't easy but it gets the job done.
0 votes Thank Flag Link Sat May 21, 2011
You need a written agreement from your friend that this money is a GIFT not a loan. You should both sign it and have it notarized.

Carmen Brodeur
Realty Executives
Scottsdale Luxury Realtor
0 votes Thank Flag Link Sat May 21, 2011
Your friend's offer to assist you with obtaining homeownership is a very generous and thoughtful offer.

I agree with the previous response that it would be best for you both to sign a document indicating that these funds were a gift, with no strings attached, and no repayment required. I believe this document would carry much more weight if witnessed, signed and notarized.

My advice to you would be to contact a very good mortgage loan officer to get prequalified for a mortgage and one who will advise you as to the best loan program for you and the guideines for receiving gift funds. There are usually special forms that's used in these types of loans.

Now would be a great time to buy your home while interest rates are still low.

Good luck and, should you need assistance with regard to your purchase, please do not hesitate to get in touch.
0 votes Thank Flag Link Sat May 21, 2011
what a wonderful friend you have. If you need help finding a good Realtor in your area, I would be happy to recommend one. I have met a number of great agents in your area through Women's council of Realtors and the RE/MAX convention. Call, e-mail or text, I will get back to you promptly.
Marge Bennett
RE/MAX Realty Group
Marge@MargeBennett. com
0 votes Thank Flag Link Sat May 21, 2011
I would certainly speak with a Lender first and let him/her know your situation. Let them qualify you for a loan based on the amount you are putting down. At this time they will tell you what and how the document should read. I would recommend you either do this with an Attorney and definitely with a Notary. Your house search can be made easy with my Listingbook tool that is directly tied to our MLS. Give it a try! Its on my website.
0 votes Thank Flag Link Sat May 21, 2011
Hello Fungirl,
I would recommend you draw up a document stating that the gift was not a loan and get both of you to sign in it and maybe even in front of a notary. As far as the loan goes for your new home purchase, each lender is different and would require a different document, most would just want her to fill out a "Letter of Explanation" stating that she is helping you with the purchase. Now you need to find a good mortgage company and get teh bal rolling, becacuse there many be a limit to how much she could give you for the home, only the mortgage officer would know the rules for whatever loan program your approved for.
Good Luck.
0 votes Thank Flag Link Sat May 21, 2011
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