Buying a home can be financial draining for many and buyers may need the help from family members offering financial assistance. Due to rising home prices buyers, especially first time buyers may request financial assistance from family members or friends for the down payment on their new home. Before we go any further in this article it’s important to always remember what you borrow, buy, etc while you’re in escrow today may tank your deal tomorrow. Always and I mean always consult with your lender when making any buying or borrowing decisions when you’re in escrow. Lenders will be happy to discuss these items and consult you in advance before you go out and buy or borrow only to realize later your no longer qualified to buy.
Once you’ve spoken to your lender and they have approved you borrowing the funds for the down payment you’ll want to have very clear lines with whomever you’re borrowing funds from. As a buyer if you are requesting family members financial assistance, make sure to have in writing the details of the money you’re borrowing. Items like the amount, whether it’s being borrowed or given as a gift, how much interest will be if interest is being charged, how it will be paid back and when are all important aspects that should be covered. Remember, it’s always better to get these items ironed out in advance as people forget things and having it all down on paper will keep things straight.
Family Members & Friends Offering Financial Assistance
Another important item to consider is how the money being borrowed or given will affect the givers taxes. Family members and friends offering financial assistance should always consult an accountant before loaning or giving any money away. It’s always nice to help someone out but the money you are assisting with today may cost you thousands later so be educated in what you’re doing.
If you’d like information on the home buying process, check out our article Home Buying Process, Timelines & Paperwork. Additionally buyers looking for low down payment options might enjoy our article Buying a Home With Low Down Payment.