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Adding myself as a joint checking account holder on parents bank account for down payment?

Hi All,

So currently, we are looking for a family home with my brother, myself and my parents. I would like the house to be under my name however, I don't have enough funds to make the down payment I would like to. I can qualify for the mortgage loan all by myself but don't have all money for the amount of down payment.

Assume purchase price of the home to be $400K.
Assume I have $125K saved up in my bank account. I would like to put 150K down.

My parents said I can use the all the money in their account for the purchase. I would be making all monthly payments and paying all expenses, I would just need money for a portion of the down payment.  Currently, my parents co-own their bank account but I would remove my mom and add myself as a joint account holder with my father so I have access to the funds. I would probably take $75K from their account and $75K from mine for down payment. 

Would this be a issue with the mortgage company/lender?
Would this be considered a loan from my parents? 
Would there be a gift tax issue here?
What if I add my father as a co-owner on the house and mortgage? 

Any help/advice is appreciated!
Thanks!
 
  • June 15 - US
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Answers (6)

You may qualify for an FHA mortgage from a minimum 580 fico score and from 3.5% down or as low as .5% half percent down payment program. If you have a minimum 620 fico score you may consider 5% down conventional with NO Mortgage insurance (Lender paid MI) or you can put down more. If you put down 20% down conventional you can have a better rate and NO MI. It only takes a few dozen question to qualify and go over your options. If you need any funds from your parents and can qualify on your own you can get the funds from them as gift funds...
  • June 15
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If you already have a 20% down payment, don't.
  • June 15
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Would this be an issue with the mortgage company/Lender?

Answer: Not if this is a gift accompanied with a gift letter and proof the funds are in an account.

Would this be considered a loan from your parents?

Answer: Borrowed funds are not allowed for a down payment so it would have to be a gift.

Would there be a gift tax issued?

Answer: I suggest consulting with a CPA. From my understanding, your Mother can gift you a maximum of $13,000 and your Father (Happy Father's Day) can gift you a maximum of $13,000 totaling a max gift amount of $26,000 before facing penalties. Again, please check with a CPA as I am not a CPA.

What if I add my father as a co-owner on the house and mortgage? 

Answer: I do feel this is the best course of action since your parents are so kind to gift you the money and this would prevent them from paying any tax penalties.

If you need further information please reach out to me here on Zillow or post on this thread so others will learn from your experience.
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The previous poster may be correct.  Here is a link for more information:  http://www.irs.gov/uac/Eight-Tips-to-Determine-if-Your-Gift-is-Taxable
  • June 15
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Profile picture for wetdawgs
Yes, there is likely to be  a gift tax issue.   This has nothing to do with "after tax dollars" as described by the previous poster.   Please see a tax accountant for accurate advice, and check the gift tax section of the irs.gov website.
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Would this be a issue with the mortgage company/lender?

 

Your parents can gift you the down payment with no contribution from you since the total down  payment is at least 20%.

Would this be considered a loan from my parents?

It would only be a considered a loan from the lender's perspective if they require you to pay them back.

Would there be a gift tax issue here?

I don't believe there will be an issue here since the money they will give you             for the down payment is after-tax dollars.

What if I add my father as a co-owner on the house and mortgage?

The house and loan can be in your name, your parents can gift all of the down payment to you and either or both of your parents can co-sign for you as non-occupying co-borrowers if necessary.  If your income qualifies you on your own, this is not necessary.

  • June 15
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