Posted on: 30th Jun, 2009 03:49 pm
My husband and I have the credit and income to buy a home but do not have the down payment. The seller of the home suggested we get a gift letter from a family member for over $45,000 to look like a down payment making the loan amount for less than the actual sale price using the gift letter as a made up down payment. The seller would be actually taking the $45,000 loss on the home. Are there any repercussions to doing this? Is it legal?
Let's clarify this for you...
If you receive a "gift" from a relative, that money must be used against the down payment and/or closing costs. That relative must sign a gift letter indicating that it does not have to be repaid. If you decide to repay that person anyway, that is up to you.
Meanwhile, at least 5% of the down payment money must come from your own funds.
I am not sure how your scenario results in a loss for the seller. I believe you are mistaken there.
If you receive a "gift" from a relative, that money must be used against the down payment and/or closing costs. That relative must sign a gift letter indicating that it does not have to be repaid. If you decide to repay that person anyway, that is up to you.
Meanwhile, at least 5% of the down payment money must come from your own funds.
I am not sure how your scenario results in a loss for the seller. I believe you are mistaken there.
TO CLARIFY THE ORIGINAL POST ABOVE:
The seller is not going to take a loss. The seller is suggesting that we hike up the sale price from the original price agreed upon then using the gift letter as a fake down payment however no money will be coming along with the gift letter. In other words the price is going to be higher to account for the down payment that will not actually be paid to the seller. He would only receive the amount that the loan is for which is the actual price we agreed upon. My husband and I are questioning the ethics behind this and are wondering what could the repercussions could be?
The seller is not going to take a loss. The seller is suggesting that we hike up the sale price from the original price agreed upon then using the gift letter as a fake down payment however no money will be coming along with the gift letter. In other words the price is going to be higher to account for the down payment that will not actually be paid to the seller. He would only receive the amount that the loan is for which is the actual price we agreed upon. My husband and I are questioning the ethics behind this and are wondering what could the repercussions could be?
Hi Guest,
What you are thinking of doing is not legal at all. You're actually not getting any money from your relatives, but you are going to show the lender as if you've got the down payment money from them. This is illegal. You could be in trouble if the lenders find it out. Moreover, the lenders do not consider the gift letter to be the ultimate evidence. They often check the account details of the borrower as well as the donor of the gift money. If they do that, you're bound to get caught.
If the seller shows lists the price of the property at an amount higher than what he actually gets, he will have to be ready to pay a huge amount of capital gains taxes. In such a case, the difference between the price at which he bought the property and the price he sells it for will be huge. Thus, he'll be liable to pay a considerable amount of capital gains taxes on the profit which he would never gain.
FHA loans require a very low down payment of 3.5%. You can wait for some time, save some money and then apply for an FHA loan to purchase a house. Which state are you in? There are various state housing authorities who help home buyers with down payment assistance programs. You may be eligible for such down payment assistance. However, you'd still be required to make a certain amount of down payment from your own source.
What you are thinking of doing is not legal at all. You're actually not getting any money from your relatives, but you are going to show the lender as if you've got the down payment money from them. This is illegal. You could be in trouble if the lenders find it out. Moreover, the lenders do not consider the gift letter to be the ultimate evidence. They often check the account details of the borrower as well as the donor of the gift money. If they do that, you're bound to get caught.
If the seller shows lists the price of the property at an amount higher than what he actually gets, he will have to be ready to pay a huge amount of capital gains taxes. In such a case, the difference between the price at which he bought the property and the price he sells it for will be huge. Thus, he'll be liable to pay a considerable amount of capital gains taxes on the profit which he would never gain.
FHA loans require a very low down payment of 3.5%. You can wait for some time, save some money and then apply for an FHA loan to purchase a house. Which state are you in? There are various state housing authorities who help home buyers with down payment assistance programs. You may be eligible for such down payment assistance. However, you'd still be required to make a certain amount of down payment from your own source.
Hi Guest,
Welcome to our forum.
It's Illegal.
You showing virtual money to lender that means you show you have money for down payment by gift card but you have not nothing if lender caught you it will not be better for you. Before giving loan they will keep your total financial information. There are more chances to get catch by lender. So do not do this.
Here is savior given better option for you, You can apply for FHA ( Federal Housing Administration ), Wait some more time, Because FHA having minimum down payment 3.5% of loan amount.
Illegal activities in financial life will create serious issues in your further life so be legal.
Thanks & Regards,
gunz.ijjistaff
:D _______________________________________________________
You can ask your queries to us anytime & we will definitely help you, Its our pleasure.
Welcome to our forum.
It's Illegal.
You showing virtual money to lender that means you show you have money for down payment by gift card but you have not nothing if lender caught you it will not be better for you. Before giving loan they will keep your total financial information. There are more chances to get catch by lender. So do not do this.
Here is savior given better option for you, You can apply for FHA ( Federal Housing Administration ), Wait some more time, Because FHA having minimum down payment 3.5% of loan amount.
Illegal activities in financial life will create serious issues in your further life so be legal.
Thanks & Regards,
gunz.ijjistaff
:D _______________________________________________________
You can ask your queries to us anytime & we will definitely help you, Its our pleasure.
There is no issue as long as you are making payment properly. Just note that total saleable value should not be more than the assessable value of property.
Mortgage Gift letter is what the donor of the gift writes to the lender stating that he has offered a gift of money to the home buyer.
Homebuyers often require extra funds to make their down payment or pay part/whole of their closing costs when there is shortage of cash to pay for these upfront costs. They can borrow from a non-profit organization but lenders often do not prefer borrowed money as the down payment. This is when cash gift from family members be helpful.
When a gift is made available to a homebuyer applying for a mortgage, he needs to write a mortgage gift letter signed by the donor and attach it with the loan application form. At times, the lender may also provide the buyer with a Gift Letter form which the latter only needs to fill out.
However, if the gift is made by any non-family member such as friend, employer, etc, then a borrower needs to provide documentation of a very close and long lasting relationship.
A mortgage gift letter includes the following:
Name of donor of the gift
Name of the recipient
Relationship between the donor and recipient
Cash amount gifted
Address of the property for which gift is made
Source of the funds (bank account, brokerage account etc) as offered by the donor.
Apart from the above, the gift letter should also state that the buyer need not repay the gift amount. Also, the lender should be assured that the gift funds were not made available to the donor from any person involved with the sale of the property including the seller, broker, real estate agent, loan officer or builder etc.
With gift of money, a buyer can afford to purchase a bigger house. At the same time, he can borrow less and thus reduce his monthly payments. However, the homebuyer needs to provide a written statement and prove that the money he's putting down is a gift
Homebuyers often require extra funds to make their down payment or pay part/whole of their closing costs when there is shortage of cash to pay for these upfront costs. They can borrow from a non-profit organization but lenders often do not prefer borrowed money as the down payment. This is when cash gift from family members be helpful.
When a gift is made available to a homebuyer applying for a mortgage, he needs to write a mortgage gift letter signed by the donor and attach it with the loan application form. At times, the lender may also provide the buyer with a Gift Letter form which the latter only needs to fill out.
However, if the gift is made by any non-family member such as friend, employer, etc, then a borrower needs to provide documentation of a very close and long lasting relationship.
A mortgage gift letter includes the following:
Name of donor of the gift
Name of the recipient
Relationship between the donor and recipient
Cash amount gifted
Address of the property for which gift is made
Source of the funds (bank account, brokerage account etc) as offered by the donor.
Apart from the above, the gift letter should also state that the buyer need not repay the gift amount. Also, the lender should be assured that the gift funds were not made available to the donor from any person involved with the sale of the property including the seller, broker, real estate agent, loan officer or builder etc.
With gift of money, a buyer can afford to purchase a bigger house. At the same time, he can borrow less and thus reduce his monthly payments. However, the homebuyer needs to provide a written statement and prove that the money he's putting down is a gift
I am buying the house. Ia m the applicant. I need a gift money. Can my husband do the gift though he's not part of the mortgage?
Hi mary,
Your husband can gift you the money though he is not a part of the mortgage.
Your husband can gift you the money though he is not a part of the mortgage.