Friday, January 3, 2014 - Article by: nationwidelenderforyou - AFG -
Quite simply, a down payment is a percentage, put forth initially on a mortgage, when purchasing a home. To many lenders, a down payment represents the commitment from the borrower in the transaction. In other words, the greater the down payment, the greater the security to lender.
Also, when a borrower puts more money down, not only is the loan process easier for that borrower; but, the borrower also creates more equity in their property, sooner.
However, with the changes in the economy, more and more borrowers are finding it necessary to find loan programs that allow for smaller down payments such as:
FHA at 3.5%
VA at 0%.
USDA at 0%.
Conventional at 5%.
***It is important to note, if you put less than 20% down on a FHA or Conventional mortgage, mortgage insurance is required.
In some cases, borrowers are opting to have their down payment "gifted" rather than utilizing their own funds, for a variety of reasons. (Cash flow being the number one reason!) It is important to understand, how to properly document your down payment "gift", so that it does not adversely affect you during the loan process.
Remember, it is imperative to work with an experienced loan officer during the home buying process; who can outline the hurdles that may come about during the loan process. Bart Gabe has been lending nationwide, since 1987, and he is happy to answer your questions, 7 days a week at 800 315 8803 or visit www.bartprequalifies.com Bart can provide you a gift letter template, and explain the process in greater detail.
Here are the basics: o100% of the down payment can be "gifted" - USDA and most VA loans (JUMBO VA Loans are the exception), do not require a down payment.
oBoth the "gifter" and "giftee" should maintain a paper trail. If the gifter is providing the gift from their bank account, then a copy of the statement showing the withdrawl, will be needed. Once the "giftee" has received the gift, they should be able to provide a copy of the statement with that deposit.
oMake sure if you are drafting a letter of your own, that the word loan is not mentioned. If the "gifter" implies that this is a loan, and not a gift, repayment of that debt will be calculated into the borrower's debt to income calculations. This could adversely affect the borrower's loan.
***In most cases if the deposit was made more than 60 days into the giftee's AKA borrower's account, the money is considered seasoned; and, therefore the underwriter will not need a papertrail. Please feel free to contact us at 800 315 8803 to discuss your loan scenario, 7 days a week.
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