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Can parents take out a home equity loan to gift you for downpayment or closing costs

I'm buying a single family home wondering if my father can take out a home equity loan and gift it to me and is there a limit to gifting. The bank I will be going though is Wells Fargo Home Mortgage Chicago IL.
  • December 27 2013 - Chicago
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Answers (13)

Profile picture for JustinLeffew
I have been burned more than once Hamp. Glad to see the guidelines loosening somewhat! 
  • December 30 2013
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Good catch, Justin. I was old schooling that one. Rust never sleeps.
  • December 29 2013
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Yes, your parents can gift you funds from a Home Equity Line Of Credit (HELOC) and Wells Fargo underwriter will condition for a statement from your parent's illustrating they have the funds available in the HELOC.

On another note, I would advise your parents to speak to there CPA about the amount being gifted to avoid any tax ramifications on gift funds being used from this type of account and how they can write off the interest and also, gift funds. Good luck with your new home purchase.
  • December 29 2013
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Profile picture for JustinLeffew
5% from own funds was typically a PMI overlay but mortgage insurance companies have since waived that and all funds can be from a gift. I know at present Fannie allows 5% down fully gifted funds.
  • December 29 2013
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How much of a gift are they willing to provide?

Generally, most conventional loan programs will require that you have 5%, of your own funds, in the down payment, unless your people give you at least a 20% gift. There is no limit to how high the percentage can be.
  • December 29 2013
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Profile picture for JustinLeffew
If you are going through Wells Fargo, give your Loan Officer a call. Most of us don't work for Wells, thus don't know their specific overlays. Typically, it can be done.
  • December 29 2013
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Profile picture for gator70
Read the Fannie Mae rules. And read the Dodd-Frank Reform and Consumer Protection Act
  • December 29 2013
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Profile picture for Brent Tye

Loan programs have different rules for gift funds.  Since you already have a lender, ask them what their rules are for this.

  • December 28 2013
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This can only be answered directly by the mortgage rep. There are programs available that allow the down payment to be in the form of a gift. Make sure to notify the mortgage rep up front so it doe snot cause issues later in the process. The underwriter is going to ask where the money came from as well as any recent large deposits in your accounts. 
  • December 28 2013
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Yes this should be acceptable. The lender will not have any limits on the amount if the gift however there could be taxable events that require you declare the gift as income if it exceeds allowable amounts, Consult your CPA on this matter.
  • December 28 2013
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Profile picture for Andrew Malak
Yes, they can. You need proof that you got $ from them. yes, there is a limit. I think it is $10,000. But check with your loan officer. If you need referral for good loan office, let me know.
  • December 28 2013
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This question is best answered by your loan officer.  Underwriting guidelines vary from lender to lender depending on if they are going to sell your loan on the secondary market or not.   I would ask this question at the time you are putting in your application, well before you start looking for a home.  You may need to do some paper-trailing or seasoning of funds, and that will take time.  Gifting limits will also depend on the type of loan you are getting.

Good luck!
  • December 27 2013
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Profile picture for Matt Laricy
You will need a letter for the gift. Not sure if you can do it through equity of the home though. The best bet is to ask the Mortgage lender from Wells if this can be done. if you need a referral there, just let me know.
  • December 27 2013
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