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down payment gift money


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For the buyer, the gift programs can be a life saver. The only real problem is getting the seller to participate in the program. It takes a motivated seller, who is willing to forgo some equity to get the home sold. Not impossible in most areas of the country, and general consensus will note that sellers may be more motivated in the winter months, because of the slowdown in reall estate sales.

The only drawback is the price that must be paid to the gift fund for administrative expenses. The seller not only commits X dollars, but theey must also pay the fee. Therefore, a good mortgage broker can determine whether particiapting in a gift program is better than just accepting sller concessions to pay closing costs.

If you are qualified for a 100% purchase, hten seller concessions to pay all closing costs would be better, because most lenders will allow concessions in the neigborhoos of 3% to 6%. Some will allow seller concessions to pay for prepaid expenses as well. If you happen to qualify for one of these programs, then the seller would not need to pay the adminisrtaive fees for the gift program.

For FHA (which requires a 3% contribution), the buyer has no money for the down payment, then a gift program will need to be used to cover the down payment. Using a play with numbers and yield spread to pay the broker and all closing costs, you can actually get full 100% financing on an FHA mortage.

It really depends on the situation, but there are creative ways to make gift funds work for you, and there are times when using a gift fund is a waste of money, and seller concessions will work best.

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