An Early Christmas Gift: The Gift of Down Payment Funds

An Early Christmas Gift: 
The Gift of Down Payment Funds


     Many of today's First-Time Homebuyers have learned from previous homebuyers' experiences and financial struggles ...       
     
     The previous decade's housing crisis taught them they should buy a home well within their financial means.  One that is under-budget and below the maximum levels at which they can be Pre-Approved for a Mortgage.

     The crisis has also shaped these Millennials new view of home ownership.  One much different from previous generations.  

     Many are willing to consider and buy homes that fly in the face of what is considered "conventional wisdom".  They'll consider making property purchases on investment potential or short-term utility alone.  That meaning they fully recognize that their first purchase is just that ... a means to enter the market, way-lay rising rent, build equity, while taking advantage of current low interest rates. 

     While these younger buyers hold a new expanded view of what and where they'll consider a home purchase, they must still face an age-old problem shared with many of their older counterparts.  Raising down payment funds.  

     Limited savings and funds for down payment remain an obstacle or challenge for many.  Even so, many Millennial buyers hope to avoid monthly Mortgage Insurance payments, a cost dictated when down payments of less than 20% are made on a home purchase. 

     One way they can accomplish that is by calling on Mom and Dad to assist them with monetary gift funds ... or asking them to co-sign on their mortgage.  

     A recent survey performed by Bank of America and conducted by Braun Research Inc. shows that once again this new generation of Buyers is placing their own mark on home buying.  The BOA survey reports the growing frequency with which parental/relative gift funds are being received and in which form they are provided:

     "A fifth of the respondents expected to receive money for a down payment, with another fifth expecting assistance in furnishing the home. Fifteen percent of the respondents expected money to help with the monthly mortgage payments."
 Establishing Credit
     Many parents/relatives are willing and happy to offer gift funds in order to help their children buy a home ... and they're not waiting for Christmas, birthdays, or other special events to bestow them. 

     Now it must be noted that certain criteria need to be met when Gift Funds are used in the purchase of a home. Most importantly:  Funds must be a true gift, with no expectation of future repayment demanded between the provider of the funds and the recipient.

     Any parent considering the gifting of funds should talk to their Tax Advisors or Financial Planners first.  That way they are fully educated as to the tax implications and impact of gifting these funds.  Same goes for parents thinking of becoming a Co-Signer.  

     Because by providing these funds, parents are taking on a legal responsibility of equal measure with their child when they sign on their Note and take on mortgage debt.  That involvement in gifting of funds or co-signing of a loan can obviously impact the parents' ability to borrow money in the future, either by limiting the funds available or full loan denial.  

     Take heed and hold these conversations with Tax Advisors, Financial Planners and myself (your Mortgage Originatorprior to entering into any verbal or written obligation with your child.  That way you are fully aware of your financial and legal obligations when doing so, as well as your emotional ones.

     It's commendable that parents (relative) wish to assist their child in the purchase of a home.  And at today's low interest rates, doing so can be an extremely wise financial move to make.  

     Start the conversation to discover what options might exist for you to buy in the Chicagoland area ... no need to wait for Christmas ...    



    
     * Hoping to Buy or Refinance a Home in New Lenox or elsewhere in the Chicagoland area? Contact me! I'll put my 40+ years of Mortgage experience and expertise hard to work on your behalf.
     I can be easily found at:



Gene Mundt
Mortgage Originator - nmls #216987 - IL Lic. 031.0006220 - WI Licensed

American Portfolio Mortgage Corp.
nmls #175656

Direct: 815.524.2280
Cell or Text: 708.921.6331
eFax: 815.524.2281

 

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Gene Mundt, Mortgage Originator, an Originator with 40+ years of mortgage experience, will offer you exemplary mortgage service and advice when seeking: Conventional, FHA, VA, Jumbo, USDA, and Portfolio Loans in Chicago and the greater Chicagoland region, including: 
The Lincoln-Way Area, Will County, (New Lenox, Frankfort, Mokena, Manhattan, Joliet, Shorewood, Crest Hill, Plainfield, Bolingbrook, Romeoville, Naperville, etc.), DuPage County, the City of Chicago, 
Cook County, and elsewhere within IL & WI.


Referrals are Welcomed!
      


       



     

     

       

        

       

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