Instead of receiving wedding gifts that never see the light of day, married-to-be couples are setting up down payment gift accounts, so they can receive wedding gifts towards a down payment to purchase a home. Many a study reveals that the main reason people continue renting and can’t buy a home, is because they don’t have any down payment funds. Here are some tips to help couples set up a down payment fund, so they can get the wedding gift of their dreams, a beautiful new home!
The #1 reason renters can’t buy a home
As this survey below by Yahoo Real Estate confirms, the #1 reason renters can’t buy a home is because they don’t have money for a down payment, in fact over 53% of people in this study confirmed this.
Therefore a good idea in today’s market place, is to teach buyers creative ways how to get access to funds to purchase a home.
I am sure many soon-to-be married couples would rather purchase a home than get many of the gifts they end up receiving :). People just don’t know this is an option available to them.
Helping married-to-be couples set up a down payment fund
Did you know the FHA allows couples to set up a “Bridal Registry Account” if they are planning on getting married soon and want to accumulate funds for their down payment to buy a home? This is a great way for “married-to-be” couples to come up with their down payment to buy a home.
Just like registering at a specialty or department store, the FHA Bridal Registry program allows you to register a down payment account. Then your friends and family are able to make gift payments into an interest bearing account on your behalf.
It’s a win win! Not only can your gifts earn interest, but they can be used as a down payment towards an FHA Loan.
Here’s how it works in 3 simple steps:
*You will open a savings account at your bank prior to the wedding.
*Friends and family will be given the banking information where the gifts will be deposited.
*All of the gift funds can go towards the FHA required 3.5% down payment.
*There is no requirement that you be married prior to closing on your new home.
Another huge advantage is that there are no gift letters or other documentation required other than proof of your savings account named “bridal registry account.” It’s that simple!
Crowd-funding sites for down payment funds
More recently, niche crowd-funding sites have been popping up. A number of them focus on helping people raise cash for real estate-related pursuits, including cobbling together enough cash for a down payment.
Feather the Nest, for example, lets users create pages where they can use text, photos and video to describe what real estate aspirations they want contributors to help them fund. Users then share their campaigns through email and their social media accounts.
Feather the Nest isn’t the only company trying to help people crowd-fund down payments. Hatch My House also targets couples who would prefer down payment assistance over cutlery and candlesticks.
Additional help for buyers with closing costs
If buyers need additional funds to help pay for closing costs, we can offer them a lender credit that can pay all of their closing costs.
Buyers and agents have to get creative these days to get an offer accepted. For example, a purchase offer asking for seller credits to pay for a buyers closing costs will usually always place behind a buyers offer that does NOT ask for any seller credits! Most people assume because a buyer does not have funds for closing costs, just ask the seller to cover them.
So to make a buyers offer more competitive, we can pay for ALL the buyers closing costs with a lender credit!
How does this work? It’s easy, instead of taking let’s say a 4.25% 30 year fixed rate on a loan, the buyer will take a slightly higher rate of 4.5% instead, and with this higher rate there is now a lender credit of roughly 2.5% available that can be used to pay ALL the buyers closing costs.
Not only is this a good negotiating tactic, but of course it saves the buyer a lot of money too if they do not have the funds to pay for their own closing costs! I present this option to all our buyers so they know it is available!
What is a “Gift of Equity” purchase?
Another purchase option available to buyers that many people don’t know about, is a “Gift of Equity Purchase”. We have been doing several of these transactions recently, and they are a great idea in this market with the shortage of properties for sale. Here is how it works.
Let’s say a family member wants to sell a property to another family member. The parents (sellers) can gift some of the equity as a down payment to their kids (buyers).
For example, Conventional financing requires a gift of equity of 20% to qualify for this program, so now buyers can qualify for the best loan terms and rates, as the 20% gift of equity counts as a “20% down payment” towards their purchase.
If you have any questions about any of this information, or you would like to get approved for financing, please feel free to contact me directly at 858-442-2686.