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October 11, 2007
Down Payment Gift Question
I am a first-time apt. buyer who is fortunate to be getting help from my parents in the form of a gifted down payment.
My parents have the intended gift in an investment account of their own, and were planning on keeping it there until I need it (presumably so it can keep earning money).
My question is, at what point do I need to have immediate access to these funds? Should I have this money in my account before I make an offer on a place? I understand that if my offer is accepted I will have to put 10% down upon signing a contract. How fast does this happen? Will I need access to those funds the same day?
Thanks.
Comments
I wouldn't worry about it. You only put the money down when you go into contract. You can put $100 down to hold the place and they'll wait the 5 days it takes to get your check from your investment company unless the Realtor is a jerk.
Posted by: guest at October 11, 2007 6:06 PM
We're in a similar situation. Although you might not need access to the funds to actually make an offer, friends who have gone through the process have told me that it helps in getting the mortgage to have all your funds in your name. You look more financially responsible and less like you just got a check from your folks (not intended as a judgment, just how it could look!).
But if you're getting one of those stated income stated assets mortgages then that doesn't matter.
Posted by: hangonsloopy at October 11, 2007 6:25 PM
in my case, my parents transferred half the money to me in time for signing the contract (you are correct...10% of which is due at that point if you are putting 20 down. in my case i signed the contract and paid that 10% perhaps a few weeks after the accepted offer. as soon as the seller accepts your offer, i'd start the ball rolling and have your parents deposit at least half) and then they transferred the rest in plenty of time for the closing when the other 10% was due. if it's a co-op, they will like to see the money in there sooner rather than later so show that you actually do indeed have it.
went pretty smoothly doing it that way for me, but i suppose every transaction is a little different.
Posted by: guest at October 11, 2007 7:09 PM
We also had a gift from our parents. The bank will have you fill out a gift letter stating it is a gift and you will not have to repay the amount given to you.
Posted by: guest at October 11, 2007 7:12 PM
I assume the 10% you are referring to is the escrow deposit. At contract signing you will need to provide the escrow deposit and once you write that check you need to have the said money in your account to cover the check. Otherwise you're writing a fraudulent check.
Posted by: BedStuyGal at October 11, 2007 7:18 PM
To follow up on 7:12 - on a typical documented loan, you can expect your lender (and the co-op, if applicable) to look at your bank records for the prior two periods before you submit your mortgage app (and co-op app). So they will inquire about the source of the funds, and the bank (and maybe the co-op) will want a letter FROM YOUR PARENTS (not you) that it is a gift.
To follow up on 7:09 - you'll want the full amount of the gift to have occured by the time you submit your mortgage and co-op application. Listing a "potential" gift as an asset isn't going to look too favorable. More generally, depending on what kinds of properties you're looking at and how "hot" they are, you should probably have the gift occur not later than when you make the offer, so you can specify in your offer (and be prepared to back it up) that you are ready to sign a contract and put down a 10% deposit as soon as the seller is ready. This is helpful if you end up in a bidding war. Even though you might not actually need the $ for a week or two until the contract is signed, I'm sure you'd regret being pennywise but pound foolish if you tried to delay the gift to earn your parents a little bit of extra interest, and this cost you the offer.
Posted by: guest at October 11, 2007 7:34 PM
Here is something else to think about: banks often would prefer if you entire purchase was coming from your own earnings and savings. Having generous parents is not considered an asset in this scenario, but a liability. However, the bank will ask only for your bank statements going back three months. Just a little more into to help you figure out when to put the money into your accounts...
Posted by: guest at October 15, 2007 11:44 AM
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