By Anessa V. Cohen
Buying a home in today’s market—no matter where you live—is definitely more expensive than it was in your parents’ or grandparents’ day. Years ago, a home purchase might have cost a fraction of what it does today. Obtaining mortgage financing for the purchase of that home was relatively simple back then in comparison to the regulations that must be followed to qualify for a home mortgage in today’s world.
Years back, most mortgage financing was obtained at a local bank, which would also hold the note to that mortgage and do its own servicing for the life of that mortgage. You could always stop in at the bank and talk to someone if you needed some assistance.
In today’s mortgage-financing world, everything is national, subject to banking regulations and guidelines mandated by federal laws. A prospective homebuyer must fill out a vast amount of paperwork to apply for a mortgage from a lender and also qualify under all the federal banking laws and regulations in order to be approved for any new mortgage financing.
With the housing market becoming more and more expensive, it is not unusual for young couples trying to purchase their first home to utilize the assistance of family in making the down payment required for a home purchase.
This is called a gift, intended to assist home-buyers with their home purchase. With help making the down payment, they can better afford subsequent mortgage financing paid monthly based on their own income.
This is a wonderful boost for a home-buying couple, but just as documentation needed for mortgage financing must follow certain guidelines when a new borrower applies for a mortgage, gifts given to that borrower must also follow certain guidelines as part of the mortgage application process.
First off, before a gift can be considered as part of a down payment for the purchase of a home, the proposed borrowers might have to show that they have 5% of their own funds available for use towards the purchase—separate from the gift they are receiving. The gift funds may be considered in addition to the required 5% of a borrower’s own funds.
In addition, a gift must be evidenced by a letter signed by the donor. The gift letter must specify the amount of the gift being given, the date the funds were transferred, the name, address, phone number, and relationship of the donor to the borrower, and a statement from the donor that no repayment is required for the gift monies being offered.
With the gift letter, the donor is required to include a bank statement showing the existence of the funds being donated as a gift as well as proof of the transfer of those funds to the borrowers’ bank account; then the borrowers need to provide a copy of their bank statement showing the receipt of those funds into their account.
After presenting all the necessary documentation of the added gift monies for their required down payment, the new home-buyers who are lucky enough to have this assistance can now use it towards their goal of getting their mortgage approved and moving ahead to the closing of their new home purchase.
Anessa Cohen lives in Cedarhurst and is a licensed real-estate broker and a licensed N.Y.S. mortgage broker with over 20 years of experience, offering full-service residential and commercial real-estate services (Anessa V Cohen Realty) and mortgaging services (First Meridian Mortgage) in the Five Towns and throughout the tri-state area. She can be reached at 516-569-5007 or via her website, www.AVCrealty.com. Readers are encouraged to send questions or comments to anessa.cohen@AVCrealty.com.