Turn Wedding Gifts Into A Down Payment.
Have you heard of a crowd funding? Of course you have, it’s everywhere, helping to produce new products and technologies, lend support to those in need, and get new businesses off the ground. But did you know you can use crowd funding to help buy a home?
More and more young couples are foregoing toasters and flatware and are requesting cash donations instead to help fund the wedding, honeymoon travels, and even the down payment on a new home!
Let’s be clear, you can’t just launch a Kickstarter campaign and try to get a bunch of randos pay for your home, lenders have specific requirements when it comes to gifts for a home purchase. In fact, until recent years, cash for the down payment and closing costs had to come directly from the borrower, and gifts were usually not allowed or highly scrutinized. But many first-time homebuyers are well qualified in terms of income, but don’t have the cash on hand for a large down payment. In order to help people transition into homeownership more quickly, most lenders allow gifts from an “approved source” to be included in your down payment funds.
Individual lenders may have their own criteria, but according to the Federal Housing Association (FHA), in order for funds to be a gift, there must be no expected or implied repayment of the funds to the donor by the borrower. The gift giver can be a family member, friend, or charitable organization, but cannot be the home seller, real estate agent, builder, or entity. Gifts from these sources are considered inducements to purchase.
Most lenders – both for conventional and FHA loans – now allow couples to setup a “Bridal Registry Account” if they are planning on getting married soon and want to accumulate funds for their down payment to buy a home. Just like registering at a specialty or department store, the Bridal Registry Program allows couples to register a down payment savings account. Then friends and family are able to make gift payments into an interest bearing account on their behalf.
When the couple is ready to purchase their home, the money will be made available through a lender-supervised account. Unlike other down payment assistance programs, gift letters are not necessary.
If you’re getting ready to tie the knot, talk to your lender about a Bridal Registry Program to help get you right into your new home to start your new life!