Beware of down payment Gifts

Last year, 27 percent of first-time home buyers received a financial gift from relatives or friends that they applied toward a down payment on a new home - up from 22 percent in 2009, according to data from the National Association of REALTORS®. While gift-giving a down payment has increased, those who receive such gifts need to make sure they follow IRS and banks' gift-giving rules. 
    1. Home owners still need to come up with at least some of the down payment on their own. A spokesperson with Freddie Mac told Newsday that loans backed by Freddie Mac require that when the loan-to-value is greater than 80%, the buyer will need to come up with at least 5% of the purchase price. For Fannie Mae loans, Fannie allows all down payment funds to come as a gift on one-unit principal residences. The thing that is tricky is few people know whether the loan will get sold to Fannie or Freddie. 
    2. You may need to document where the down payment money came from. "A gift letter should be signed and dated and include the giver's name, address, and telephone number, along with his or her relationship to the borrower," according to the Newsday article.  
    3. If you've had the gift for a long time, you likely won't need to document it. If the gift has been in your bank account for three months or longer, it's considered "seasoned" and doesn't require a gift letter, lenders say. 

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