Having trouble saving enough cash for your down payment? This hurdle to homeownership just got easier as you may now use a gift for 100% of your required down payment. This is big news as previously you were required to contribute 5% of your own funds if the down payment was less than 20%. This new financing guideline on conventional loans has the potential to help a large number of potential buyer’s especially first timers.
When accepting a down payment gift it’s important to follow the correct procedure in order for a gift to be accepted. First off, a down payment gift may only come from a relative, such as a spouse, parent, child, or other relative (by blood, marriage, adoption, legal guardianship, a fiancé, fiancée, or domestic partner).
If you are planning on purchasing a home this spring you will need a mortgage. Before you begin house hunting it is recommended that you get pre-approved for a loan so that you know how much you can afford. Remember, pre-approved and pre-qualified are not the same.
A pre-qualification is good to get a ballpark figure but if you’re serious about becoming a homeowner you will want a more accurate number in mind to set your budget. The main difference between pre-qualification and pre-approval comes down to credit verification. Your credit score is a big factor when it comes to qualifying for a mortgage loan and with a pre-approval your credit history will be reviewed.
While a 10 year mortgage loan is not for everyone it does have some great benefits. If you are currently shopping for a home loan or looking to refinance don’t overlook your other financing options besides the traditional 30 year fixed rate mortgage.
One of the greatest benefits of a shorter term mortgage, such as the 10 year fixed, is that the interest rate is much lower than longer term loans such as the 30 year fixed. Mortgage interest rates on shorter term loans can be 1-1.5% lower than 30 year fixed rate loans. This results in thousands of dollars saved in interest over the life of the loan.
Tax season is in full swing with the April 15th deadline fast approaching. Now is a good time to gather your financial information to make sure you have everything organized when it comes time to pay your taxes within the coming month.
If you've purchased a home last year or done a mortgage refinance you will receive a Form 1098, which includes the amount of mortgage interest that you paid during the year. In most cases that amount is tax-deductible. You'll need to file an itemized Schedule A, but the savings will be worth it. Also, every dollar used to finance home improvement projects up to $100,000 reduces your taxable income dollar for dollar.
Your home is one of the largest tax write-offs you will have and will increase your refund (or decrease what you owe). So if you bought a home in 2013, make sure you receive all of the tax deductions and tax credits to which you’re entitled for the year. Here are some tax deductions for home mortgage interest and other home tax deductions:
· Property taxes and real estate taxes
· Mortgage interest paid
· Points you paid when you bought the house
· The interest on up to $100,000 borrowed on a home-equity loan or home-equity line of credit
· The premiums you paid for private mortgage insurance (for mortgages issued after 2007)
· Home improvements required for medical care
Many homebuyers use gifts from relatives and friends to help fund the down payment for their home purchase. It is very important to make sure the gifts you are receiving are traceable so lenders know where your money is coming from. Part of the mortgage process involves the lender to verify all your financial accounts so a proper paper trail is necessary in order for your loan to be approved.
First you will need to obtain a gift letter that can be provided by your lender that includes the amount of the gift, the property address, the relationship of the gifter to the giftee, and a note that states the gift is not a loan and will not be repaid. After all parties sign the letter, a check should be written out with the exact dollar amount stated in the letter. Note that a photocopy of the check will be required by the lender.
When depositing the check, remember to make the deposit into the account from which your money at closing will be taken from. Also, only deposit the gift funds and do not make any other transaction, don’t forget your receipt which will be required by the lender.
The last thing you should be aware of is that not all types of mortgage loans have the same guidelines for down payment gifts. Some require the down payment to be at least five percent of the borrowers own funds and others do not have any limits. Speak with your mortgage lender before starting the gifting process to prevent any setbacks.