Many first-time home buyers receive down payment assistance from a family member or close friend, but they may not realize there are specific guidelines they must follow when they take money from others for a home purchase.
Buyers will need a gift letter from the person or persons who gave them the money. The person who gifted your buyer the money will need to state on paper that he or she does not plan on asking for the money back in return and that it is, indeed, a gift.
“The gift letter is very serious,” says Casey Fleming, mortgage adviser and author of “The Loan Guide: How to Get the Best Possible Mortgage.” “While it is doubtful that a lender would ever audit a file after the fact to see if the recipient is paying the donor back, if the transaction goes bad, you might very well find yourself with a subpoena in your hand.” Remember, you cannot lie on a mortgage application. It’s a felony.
Source: “Getting a Down Payment as a Gift? Avoid the Mistakes That Could Mess You Up,” realtor.com® (Nov. 28, 2016)