can sellers GIFT down payment?? - Posted by charles (del)
Posted by charles (del) on October 24, 1998 at 01:56:35:
Plan to flip rehab home soon. Can I gift cash to seller at settlement to meet FHA or other down payment requirements? I thought I saw someone write about this before.
I?m assuming that your question is that can the seller gift the buyer the downpayment money for an FHA loan. The answer is no.
For the purpose of an FHA loan the buyer can be gifted the downpayment and closing costs from a relative?.but not from the seller. Typically the lender will want a gift letter signed by the relative, and a cashier?s check made out to the buyer drawn by the seller. At least in this area I have not seen the lender verify the source of funds or the seasoning of said funds from the relative. I?ll let you put the rest of this together if you have a mind to. Again, this pertains to an FHA loan.
I might point out to you that there are 100% loans available currently for a buyer. The seller can also contribute a percentage of the purchase price toward closing costs. The buyer must have decent credit.
I’d be careful here. The seller can pay the “prepaids”…he can also pay the origination fee and discount points. But IF the seller pays points FHA will lower the maximum loan amount. The effect that this has is that the seller is paying, but it’s not lowering the out-of-pocket cash required of the buyer. I would recommend that you verify which closing costs can be paid without lowering the loan amount under FHA with an FHA lender.
By the way, it’s a small but important point. FHA is not a first-time buyer loan. It’s open to anyone who qualifies under the guidelines as long as the loan amount is under the maximum’s for the area set by FHA.
(a)
Taxable transfers
(1)
General rule
A tax, computed as provided in section 2502, is hereby imposed for each calendar year on the transfer of property by gift during such calendar year by any individual resident or nonresident
Sec. 2502. Rate of tax
STATUTE
(a)
Computation of tax
The tax imposed by section 2501 for each calendar year shall be an amount equal to the excess of -
(1)
a tentative tax, computed under section 2001(c) on the aggregate sum of the taxable gifts for such calendar year and for each of the preceding calendar periods, over
(2)
a tentative tax, computed under such section, on the aggregate sum of the taxable gifts for each of the preceding calendar periods.
(c)
Tax to be paid by donor
The tax imposed by section 2501 shall be paid by the donor.
Sec. 2503. Taxable gifts
STATUTE
(a)
General definition
The term ‘‘taxable gifts’’ means the total amount of gifts made during the calendar year, less the deductions provided in subchapter C (section 2522 and following).
(b)
Exclusions from gifts
In the case of gifts (other than gifts of future interests in property) made to any person by the donor during the calendar year, the first $10,000 of such gifts to such person shall not, for purposes of subsection (a), be included in the total amount of gifts made during such year. Where there has been a transfer to any person of a present interest in property, the possibility that such interest may be diminished by the exercise of a power shall be disregarded in applying this subsection, if no part of such interest will at any time pass to any other person.