Determining how much money you will need for a down payment on a home purchase depends on the type of mortgage you choose. Down payments can range anywhere from 20% of the purchase price for a conventional mortgage to 5% of the purchase price with a FHA backed mortgage. Regardless, accumulating a down payment on a home sometimes requires the assistance of relatives to provide a monetary gift to help cover some or all of a down payment.
But, as Lisa Prevost with the New York Times points out, “mortgage lenders closely scrutinize cash gifts.” Why? Ray Mignone with Ray Mignone & Associates, a New York financial planning firm, explains, “Basically, banks want to make sure that you’re not getting a second loan. If all of a sudden $50,000 pops into your account, they want to make sure it’s not a loan against the property that they’re going to put a mortgage on.” While down payment gifts can be a big help in the home buying process, here is what you should know if you are the gift receiver or the gift giver: http://nyti.ms/VEPDgs