I am buying a house and my parents are loaning me 10,000 so i can pay them back interest free. THe back would not let me get the mortgage unless they filled out a gift letter saying it was a gift and i would not have to pay them back? Why is this? I just saw a commerical on TV the other day about helping your kids finance college and homes by loaning them money so they save on interest? Thank you if you have an answer. Why can't parents loan you 10,000 for downpayment on house?
2006-11-17 02:04:51 · 19 answers · asked by Anonymous in Pregnancy & Parenting ➔ Newborn & Baby
You can be "gifted" 10,000 a year and so can your husband tax free. If they do not say it is a "gift" you have to pay taxes on it since it is income. Also the mortgage company wants to make sure they are the only one with "rights" to the deed and if you owe money to someone they have rights. So get the letter and work out your own arrangement with your parents.
2006-11-17 02:13:57 · answer #1 · answered by victoriah68 3 · 0⤊ 0⤋
The bank doesn't want your parents to loan you the money because then it means that they, the bank, lose out on the interest on $10,000, which really, if it's say 7%, is only $700. But the bank does see it that way. They want to make as much money off of you as they can. When my husband & I bought a house, my dad gave us $10,000, as a gift. The bank didn't care, if it was a gift or anything, but they just wanted to know how you got the money, sort to speak. This way, you save $700, and can take the mortgage out over less time.
2006-11-17 02:17:03 · answer #2 · answered by Anonymous · 0⤊ 1⤋
Mostly because it is a loan - even if it is interest free. You will still have to make a payment to them every month & when they figure that payment in you probably don't have sufficient income to support the house payment too. Your parents could write a letter stating the money is a gift even if it isn't. I know that really isn't honest but if you are SURE you can make the payments on your house even if you are paying your parents monthly then maybe they would be willing to do that. Good luck to you!
2006-11-17 02:28:35 · answer #3 · answered by dmommab@sbcglobal.net 3 · 0⤊ 0⤋
The lender is looking at your debt load. They see that you can handle the mortgage payment, but not an additional ten thousand dollar loan, too.
So, by signing a gift letter, you're certifying to the lender that the ten thousand dollars won't cut into your ability to pay the lender back.
Also, by signing the gift letter, you're certifying to the government that this really is a gift. Fraud is a felony, and can land you in prison. Think long and hard about your intentions, and stop posting criminal intent on the internet.
2006-11-17 02:14:23 · answer #4 · answered by Stuart 7 · 0⤊ 0⤋
The reason might be that if you have to pay your parents back the bank will be worried you will not be able to make the mortgage payments so they want to make sure you are taking care of the first priority... its a lot of money they loan you... ya know what I mean.
2006-11-17 02:13:03 · answer #5 · answered by Bella 2 · 0⤊ 0⤋
They can they just have to fill out the gift letter as stated. The bank wants to make sure you can afford the house. They like to see where all your money is coming from.
2006-11-17 02:12:48 · answer #6 · answered by JS 7 · 0⤊ 0⤋
When a bank qualifies you for a mortgage the use a bunch of different measures. One of them is that your house payment has to be less than a certain percentage of your monthly income. It could be that if the bank calculated how much your payment to your parents would be each month and added that to the bank payment you would have exceeded that percentage. It's all a game. Enjoy the new place.
2006-11-17 02:11:03 · answer #7 · answered by Gene 7 · 0⤊ 0⤋
They can loan you, they have to fill out that gift form.
This tells the bank that you are not acquiring another bill to pay, so you can still qualify for the house.
You do need to claim it on your income taxas as income, per the letter the bank will file with the IRS.
2006-11-17 02:14:31 · answer #8 · answered by janicajayne 7 · 0⤊ 0⤋
If you don't have them sign the gift letter, the bank sees this as a second lein on the house, which changes everything as far as the bank is concerned. Just have them sign the gift letter, knowing that you're going to pay them back, and let them know you're going to pay them back, even though they legally have no recourse against you once they sign the gift letter. It's a common practice.
2006-11-17 02:11:10 · answer #9 · answered by togashiyokuni2001 6 · 1⤊ 1⤋
They need a gift letter so it's not a debt. Your parents can still loan it to you and write the letter and you can still pay it back.
2006-11-17 03:21:41 · answer #10 · answered by KathyS 7 · 0⤊ 0⤋