If you’re a first-time home buyer, you may have heard the term “gift letter” when you started to think about getting a mortgage. It sounds too good to be true. Someone can give you a gift to help you buy your first home. How does it work?
Many mortgage lenders, including We Florida Financial, recognize that it can be a challenge to come up with a down payment and closing costs. Most lenders want a 5% down payment. Closing costs range from 3% to 6% of the purchase price for a single family detached home. This can add up fast, especially in the south Florida market where our home prices are higher than the rest of the state.
We Florida Financial has a first time home buyer program that allows you to achieve the dream of home ownership with just a 3% down payment. On a $150,000 home, the 2% savings is significant.
If your savings account doesn’t show that you’ve accumulated enough cash to cover the down payment and closing costs, your lender will naturally ask you where the money will come from. Although it would be great if your college roommate, coworker or the postman offered you money, lenders won’t consider that as an acceptable source of funds. Lenders will only allow family members or domestic partners to help you with these costs and get you on the road to home ownership. Your family can give you as big a down payment as they like, plus money to cover closing costs.
So what’s the gift letter? Your lender will ask the giver of the money to write a letter stating that the funds are a gift to you to help you buy your home. They also have to state that you do not have to repay them. Isn’t that the best gift of all?
Our Mortgage Loan Officers are here to help you make the best home buying decision for you and your family. Contact us to learn about the right mortgage program to help you secure your future.
Note for members in Florida: our first-time home buyer program includes the following Terms & Conditions: At least one borrower on the application must be a first time home buyer. Borrower must reside in the property being purchased as their primary residence and have had no ownership interest (sole or joint) in a residential property during the three-year period preceding the date of the purchase of the security property. The property being purchased must be a one-unit single family home or townhome. Condominiums are not eligible for the first time home buyer loan. This loan is available for a 15, 20 or 30 year term.
The interest you pay may even be tax deductible (see your tax advisor for details). Loan terms and conditions depend on credit qualifications and approval.
Payment example: a loan in the amount of $155,200 would have a principal and interest payment of $740.95 at a rate of 4.00% / 4.727% APR (Annual Percentage Rate) for 360 months. Payment example does not include taxes and insurance.
We Florida Financial membership is required. Membership is open to individuals and businesses located in Palm Beach County, Miami Dade County, Monroe County, Broward County and other Florida Counties. Members must maintain a savings account with a minimum balance of $5 for the duration of their membership.