Looking to purchase a home and short on money? What options are available and what should you do? Well a gift from a relative and seller contributions can help you get into a new home for minimal costs. When you purchase a home you will have a down payment + closing costs = total cash to close. The down payment is simply the amount of money required to put down depending on the loan program you qualify for. Here is a breakdown of the down payment loan mortgage options.
VA & USDA Loans – 100% Financing / 0 down payment
Conventional Loans – 3% – 5% down payment
FHA Government Loan – 3.5% down payment
Jumbo Loan – 10% down payment with qualifying credit
Borrowers can use gift funds for some or all of the minimum contribution including the loan closing costs in the following situations. Borrowers may pool their funds with gift funds received from one of the following sources: (down payment funds may never come from the seller unless it is being sold from a direct relative to relative as a gift of equity).
- A relative or domestic partner who has lived with the borrower for the last 12 months
- A fiancé or fiancée, as long as both individuals will use the home being purchased as their principal residence.
CONTRIBUTIONS BY INTERESTED PARTIES
Some closing costs and prepaid settlement costs generally are paid by the property purchaser, while other costs are the responsibility of the property seller. When any costs that are normally paid by the property purchaser are paid, indirectly or directly, by someone else, they are considered to be contributions. All contributions may be paid by any interested party to the property sale transaction, although limitations will be imposed on the amount of the contributions.
Closing Costs Include: Lender fees, title fees, taxes, insurance on the home, hoa fees if applicable and several other that will be provided in a fee estimate sent to you.
The maximum allowable contributions that interested parties may make for a conventional mortgage are limited to:
- 2% of the lesser of the property’s sales price or appraised value for a mortgage secured by an investment property
- 3% of the lesser of the property’s sales price or appraised value for a mortgage secured by a principal residence or second home, if the LTV ratio, or if applicable, the CLTV, is greater than 90%
- 6% of the lesser of the property’s sales price or appraised value for a mortgage secured by a principal residence or second home, if the LTV ratio, or if applicable, the CLTV ratio, is in the range from 76% to 90%
- 9% of the lesser of the property’s sales price or appraised value for a mortgage secured by a principal residence or second home, if the LTV ratio, or if applicable, the CLTV ratio, is ≤ 75%
As your mortgage lender we can also help give lender credits to help pay the closing costs. This is helpful if you can’t negotiate all the funds to be paid by the seller or gifted from a relative. Programs like our FHA loan are designed to keep costs down. At Texas Premier Mortgage we charge 0 lender fees saving you $1800 in upfront cost as compared to most lenders. You will also find our rates to be lower across the board on all our mortgage loan products. Contact Texas Premier Mortgage for more information on how these contributions can apply to you. We will help structure your loan and help you and your realtor negotiate the best terms for your seller contributions for little to no money down. We are here to help you get into your next home.
For more information about seller contributions and gifts from relatives, their benefits and loan options and how it may apply to you, please contact us direct at 281-627-4222 or submit the quick quote form on this page. https://www.txpremiermortgage.com
Written By: Steve Head, Mortgage Expert, Top Producing Loan Officer, Texas Premier Mortgage