What You Need To Know About Gift Funds

It’s no secret that the cost of real estate in San Francisco is high. Many first-time home buyers are turning to family—specifically, to their parents—for a little extra help. If you’re considering making a purchase that will partially rely on what are called “gift funds,” here’s what you need to know, courtesy of my colleague Gordon Friedman of Mortgage Service Professionals:

- The funds must be for a primary residence or second home (not for an investment property)
- The gift must be from a parent, relative, domestic partner, spouse or fiance
- A gift letter is required, which must state the gift amount, property address, date given/to be given, and donor address. The letter also must state that no repayment will be required
- Buyer must have 20% or more in down payment, though the entire down payment can be a gift
- If the buyer has less than 20% down, there will be a 5% borrower contribution required
- For a jumbo loan (more than $625,500), a 5% borrower contribution is required regardless of the down payment. [Read more...]