In Texas, you can use gift money to buy a home for sale in Rockport, Aransas Pass, or Corpus Christi. It can increase your purchase power, allowing you to obtain a more favorable interest rate, build equity fast, and avoid paying private mortgage insurance.
Then again, as rockportproperties.com and other experts noted, many fail to use it to its best effect because of certain misconceptions. If someone’s willing to help you purchase a house, dispel these erroneous beliefs first to make the most of your gift money:
It Can’t Be Used for Zero-Down Mortgages
Wrong. Although increasing the down payment is the most common use of gift money, you can also use it to pay for the closing costs. Sometimes, your lender might allow you to add it to your asset reserves, improving your capacity to maintain your mortgage.
It Can Be Used for Investment
Unfortunately, you can’t use gift money to buy a non-owner occupied property. You must be the one who’ll live in the house you want to purchase. The good news is you can use it to get a second home, which is helpful if you want to be a snowbird in the South.
It Can Come from Anyone
In general, lenders would only allow you to receive gift money from a non-interested party in the deal. This means you can’t accept a single penny from a real estate agent, home builder, or a property developer. In most cases, you can use funds from your parent, child, or anyone to you by blood, marriage, legal guardianship, or adoption for as long as nothing’s due in return.
It Can Be Used to Cover 100% Down Payment
Even if your lender allows you to use gift money, you might still be required to pay a portion of the down payment with funds from your own bank account. Borrower contribution minimums can depend on the type of property you’ll buy, but being asked to come up with 5% of the down payment requirement is not uncommon.
Speak with a lender to know the conditions you have to meet to use gift money. If you follow the rules strictly and use it in good faith, it can help you gain a foothold in the real estate industry faster and enjoy great savings in the long run.