Mortgage lenders allow financial gifts to first time home buyers that can be used towards the down payment on a home. These gift funds are a valuable tool for first time home buyers and may be used for conventional loans, FHA, USDA type loans, and even VA. However, they are most commonly seen paired with conventional and FHA type loans. In fact, many first time home buyers are happy to learn that FHA gift funds can reduce their required cash to zero!
Conventional Financing And Gifts
Loans that are backed by Fannie Mae and Freddie Mack allow the buyer to use financial gifts towards the down payment, closing costs, and fees. The buyer is not required to use any of their own funds when receiving a financial gift that covers the entire down payment and loans costs for most loans. There are some exceptions which would require the borrower to contribute 5% of their own funds. This personal contribution is only required when:
- The amount gifted is less than 20% of the purchase price, and
- The property has more than one unit.
- Or, if the loan needed is a Jumbo Loan in excess of $417,000
FHA Gift Funds
The minimum down payment for an FHA mortgage loan is 3.5%. Thus, the typical FHA buyer puts down 3.5% on their first home. This minimum investment helps up the ante for first time home buyers and reduces the risk of foreclosure.
However, there is one exception to this rule of minimum investment. FHA allows all or any of the minimum investment to be made with a gift. This means that borrowers do not need to put in any of their own money of they are receiving the full 3.5% as a gift.
For more information about how you can help the first time homebuyer in your life, Contact a qualified mortgage professional or Ann Huskey REALTOR® for the name of a lender in your area.
ANN HUSKEY – REALTOR® 850-212-1982 * ANNHUSKEY@HOTMAIL.COM