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I don't have enough for 20% down payment, however, my parents are willing to help us out with our downpayment... it won't be a loan, but a gift that we won't have to repay... if I just deposit the funds from them into my account, will the bank/lender become suspicious on where we got the money... do u think the lender will deny the loan thinking that it's not a gift and possibly a loan from someone? Will i have to pay taxes on the money I received as a gift? The gift amout will be appx $70k... thanks.
I don't have enough for 20% down payment, however, my parents are willing to help us out with our downpayment... it won't be a loan, but a gift that we won't have to repay... if I just deposit the funds from them into my account, will the bank/lender become suspicious on where we got the money... do u think the lender will deny the loan thinking that it's not a gift and possibly a loan from someone? Will i have to pay taxes on the money I received as a gift? The gift amout will be appx $70k... thanks.
Wow, that is a nice gift!!!!
Yes, the lender WILL question it, as well as gife you a form, called something like "A Certificate of Gift" which your parents will be expected to fill out, stating they do not expect you to pay them back.
As for whether or not you have to pay taxes on it... that issue may come up when you file this year and show your bank statement. I would definitely be surprised if an amount that high was NOT questioned and taxed.
Best of luck!
Have your parents talk to a tax accountant before they give you the money. It's the donor who pays gift tax on more than $12K (single child)/ $24K (couple) per year and if you're not going to buy until winter, it would probably save them some on taxes if they split the gift between a Christmas check and a second check in January when they're into the next tax year.
I ran into a similar situation. A lender will ask for is for your parents to fill out a letter that states that this is a gift to you into such and such account. They will also ask for a copy of the statement that the check was deposited and the copy of the cancelled check. You can get that from your parents. I personal check is fine, but not a check that goes out to “cash”.
As for tax implications, I researched this too. Here is what I emailed out to my in-laws:
A gift receiver will not incur a tax hit on income.
A gift giver will get taxed depending on certain conditions
- Gifts in $130000 per person is allowed per year. (Technically your in-laws can give $52000 tax free because it’s two people giving to two separate people.)
- Gifts over $13000 (or up to $52000) will get taxed UNLESS you file a unified tax form which has to be filled out every year then on after. Max allowance is $345,800.
I ran into a similar situation. A lender will ask for is for your parents to fill out a letter that states that this is a gift to you into such and such account. They will also ask for a copy of the statement that the check was deposited and the copy of the cancelled check. You can get that from your parents. I personal check is fine, but not a check that goes out to “cash”.
As for tax implications, I researched this too. Here is what I emailed out to my in-laws:
A gift receiver will not incur a tax hit on income.
A gift giver will get taxed depending on certain conditions
- Gifts in $130000 per person is allowed per year. (Technically your in-laws can give $52000 tax free because it’s two people giving to two separate people.)
- Gifts over $13000 (or up to $52000) will get taxed UNLESS you file a unified tax form which has to be filled out every year then on after. Max allowance is $345,800.
Sorry, I wasn't sure if I were clear that the $52,000 senerio is for two married in-laws / parents giving to a married couple. Do the math to figure out how much can be given tax free without reporting it to the IRS.
I would be less concerned with taxes than making sure the lender is totally cool with your $70K as a gift -- that is huge honking hunk of dough! Even if you are looking at at $350K house that is going to cause some lenders to really scrutinize your assets and ability to meet the mortgage...
I don't have enough for 20% down payment, however, my parents are willing to help us out with our downpayment... it won't be a loan, but a gift that we won't have to repay... if I just deposit the funds from them into my account, will the bank/lender become suspicious on where we got the money... do u think the lender will deny the loan thinking that it's not a gift and possibly a loan from someone? Will i have to pay taxes on the money I received as a gift? The gift amout will be appx $70k... thanks.
They'll probably have to provide a notarized affidavit, explaining that the money is not a loan but a gift.
And my guess is that you will have to pay tax on the gift.
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You will be required, with the exception of some specialty mortgage products, to contribute at least 5% of the down payment of your own funds unless the gift fund will bring the total loan to value of the home below 80%. Don't have the funds deposited just yet, you will need to document the funds being deposited as well as being withdrawn from the gifter's account. Let your loan officer know ahead of time that you will be receiving said gift. The LO will provide you with a gift letter disclosure for the gifter (and yourself if I recall correctly) to fill out, sign, and date as part of the application and disclosure package.
I ran into a similar situation. A lender will ask for is for your parents to fill out a letter that states that this is a gift to you into such and such account. They will also ask for a copy of the statement that the check was deposited and the copy of the cancelled check. You can get that from your parents. I personal check is fine, but not a check that goes out to “cash”.
As for tax implications, I researched this too. Here is what I emailed out to my in-laws:
A gift receiver will not incur a tax hit on income.
A gift giver will get taxed depending on certain conditions
- Gifts in $130000 per person is allowed per year. (Technically your in-laws can give $52000 tax free because it’s two people giving to two separate people.)
- Gifts over $13000 (or up to $52000) will get taxed UNLESS you file a unified tax form which has to be filled out every year then on after. Max allowance is $345,800.
Yes, a gift letter will be required by the lender as well as proof (i.e. bank statements from both parties) of the source of funds.
Lenders will question any large deposit that's not documented as income, etc., so get all explanations ready asap, if that should apply.
And no, the recipient(s) owe no income tax on the gift but the gifter must file a gift tax return for anything over $13,000 per year per person.
The "Maximum Allowance" does not refer to the total amount gifted, but to the total tax credit for gifts.
The question is why do you not have any of the down payment. Are you buying too much house for yourselves?
The OP said, and I quote: I don't have enough for 20% down payment To me, that implies there is money for a down payment, just not enough for the 20% to avoid PMI...
Also, not having enough to cover the 20% doesn't mean the current income can't comfortable carry the house.
Your thoughts on that?
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