Two Things I Wish I’d Known About Down Payment Gifts
When it came time to buy our first house, my parents did an amazingly generous thing: They gave us a big chunk of money for our down payment. We truly appreciate the gift, and wanted to find a great way to say “thank you.”
Unfortunately, our mortgage company made us do the opposite. Instead of making it easy for them to be generous, I had to call my parents and ask for “just one more favor” as the bank made them jump through hoops and intruded into their personal finances.
Little did I know, that the hoop-jumping could have been avoided if I’d known two simple things:
- Deposit the Money Prior to Closing: I’m so new to this home-buying thing that I didn’t know when the gift was supposed to be given — present a check from my parents at closing? Deposit it beforehand? Just a few days before the mortgage company’s final underwriting deadline, they told me to show them my transaction history where the funds were deposited. Deposited? Like, in past tense? Oops. Ensue scramble to get the check from my parents.
- Get a Personal Check: A personal check allows the mortgage company to immediately verify the source of the enormous deposit into our checking account. We thought a bank check would be best, but it does not have their name or account number on it, so our mortgage company was unable to identify where the money came from. For all they knew, we took out a personal loan. After I deposited the bank check, the mortgage company asked for verification from my parents’ bank that the money had come from their account.
Lessons learned. Hopefully we’ll never need to know these things again, but I thought I could do some good by sharing and preventing someone else from having to jump through hoops.
Now, how can I ever thank my parents enough?
That was nice of your parents!
Yeah, mortgage companies do tend to freak about large deposits. When we bought the house we live in now, my business made a 25K deposit into our checking account a few months before the purchase in order to beef up our down payment. The mortgage company totally freaked about that and demanded to see a bunch of financial information to make sure my business was solvent. For the life of me, I couldnt’ figure out why it was any of their business. They wouldn’t even count my income for our mortgage because I hadn’t been self-employed for two years yet.
That is so frustrating — especially when they didn’t count your income! We ran into that with us, too, and were looking at a mortgage under only Mr. Stapler’s name, but I had a 1099 from a previous job the year before I started freelancing, so we were able to include my income.
Yea we bought a place back in the fall, and dealing with them was a nightmare. They don’t seem too bright sometimes. It’s like I had to draw a flow chart for them to understand where the money came from and where it went. This is definitely different from a few years back when my sister was taking out a loan…she borrowed money from her 401K but the bank asked her to say it was “just a gift” because it would be easier or less paper work!
Wow! It’s definitely a different world than a few years ago, where you could get 80/20 loans to avoid PMI, too. A lot of people I know did that pre-2008