“If you are giving a cash gift for a down payment, the giver must remember that under Federal law, each individual is permitted to give away money/valuables worth up to $13,000 to a single recipient in a calendar year. A married couple could jointly bestow up to $26,000 to a recipient in a calendar year. Anything above the annual maximum could be considered a taxable gift, and must be reported to the IRS.”
In other words, consult your tax preparer before moving any funds around!
Cash gifts are a hot topic in Newsday as well. Here’s a quick look at how different mortgage types treat cash gifts:
FHA – the entire 3.5% down payment can consist of gifted funds. Because of the loan amount limits on FHA-backed mortgages, you’ll want to ask your lender if an FHA loan would be an option for the price range you’re in.
Freddie Mac – if 80% of the property value is being financed, the buyers would have to produce at least 5% of the down payment from their own funds; the rest could come from gifts.
Fannie Mae – the entire down payment may be from gifts.
Speak to your mortgage lender in advance of receiving gift funds from family. Each mortgage type has conditions about the documentation needed for cash gifts. Knowing the underwriting criteria in advance will help you satisfy the paper trail.
Home ownership is truly the gift that keeps on giving! As your North Shore Real Estate agent, I’m happy to share industry news and information about the Chicago North Shore Real Estate market.
Our North Shore communities are a wonderful place to live! If you would like to buy or sell a home in Deerfield, Glencoe, Highland Park, Northbrook,Winnetka or nearby locales, Contact me for North Shore market expertise. You can trust my 25 years of experience for all your real estate needs.
Janie Bress
Your North Shore Real Estate Expert
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