Downpayment Assistance : How To Give And Receive A Cash Downpayment Gift For A Home

Receiving a cash downpayment gift on the purchase of your next home? You're not alone.

The tight U.S. economy plus a proliferation of first-time buyers has anecdotally increased the number of mortgage applicants using cash gifts from family and friends for purposes of a home downpayment.

If you're among today's home buyers using a cash gift for downpayment, though, you'll want to make sure that you "accept your gift" properly. Do it improperly and your lender is likely to reject your loan in underwriting.

Be sure to follow the rules of cash gifting.

Click here for a gift letter template and mortgage rates.

"Downpayment Gifts" In Demand Among Home Buyers

There are several reasons why cash downpayment gifts are more common this year as compared to several years ago. First-time buyers may have less money in savings, for example, and move-up buyers may have less home equity to carry forward after last decade's housing downturn.

In addition, U.S. tax laws have changed the gifting landscape.

However, among the largest drivers for today's gifts of equity is the want of U.S. home buyers to make a 20% downpayment. With a 20% downpayment, home buyers often find themselves eligible for the best mortgage rates available from their bank; and with 20% down, there is no accompanying private mortgage insurance (PMI) charge.

With 20% down, a buyer can look at "conventional" mortgage financing, which means that the loan is backed by Fannie Mae or Freddie Mac.

Conventional loans are typically limited to $417,000 except in designated "high-cost areas". High-cost areas are determined by the government and include such places as San Francisco and Los Angeles, California, as well as their surrounding suburbs; Washington, D.C. and all of Montgomery, Fairfax and Loudoun Counties; and New York City, among others.

In high-cost areas, conventional loans are permitted up to $625,500 for single-family homes. Multi-unit homes (i.e. 2-unit, 3-unit, 4-unit) allow for larger loan sizes than $625,500.

Not everyone wants make a 20% downpayment, however. That's okay. Cash gifts are also allowed for certain low-downpayment mortgages including the FHA purchase mortgage, which requires a 3.5% downpayment; and the Fannie Mae Conventional 97 program which requires just 3% down.

Furthermore, some buyers don't need a downpayment at all.

Veterans of the U.S. military and home buyers in less-dense cities can be eligible for 100% financing via the VA mortgage and the USDA mortgage, respectively.

See today's rates and check your mortgage eligibility.

Step 1 : Download Your "Downpayment Gift Letter"

When you accept a downpayment gift, remember that there's a right way and a wrong way to do it.  You cannot randomly deposit gift funds into a bank account, for example. That will get your loan denied.

There's a 3-step process when accepting a cash downpayment gift and no matter what your loan type -- Conventional, FHA, VA, or other -- the 3-step process is the same. Follow the rules to the letter.

First, write a gift letter that follows the includes the following information :

• The amount of the gift
• The subject property address
• The relationship of the gifter to the giftee
• A note that the gift is actually a gift and not a loan

The gift letter should be as long as needed and should not contain "extra" information. Have all parties sign and date the letter. Set the letter aside -- you'll come back to it in the section below.

Click here for a gift letter template and mortgage rates.

Step 2 : What The Giver Of The Gift Needs To Do

With your mortgage downpayment gift letter written, you'll want to make sure you don't violate the rules of "taking a gift". In order to do that, make sure to keep an extra-strong paper trail for the money being gifted.

If you are the person who is gifting funds to the buyer, for example, and you sell personal stock holding as part of the downpayment gift process, you will want to make sure that you document the sale of your stock as well as the transfer of funds from your brokerage account into the account from which you're making the gift.

Do not make the transfer without a proper paper trail.

Next, you'll want to write a check to the home buyer for the exact dollar amount specified in the gift letter you've written. Photocopy the check. Keep one copy for your records and give one copy to the buyer -- the lender will want to see it as part of the process.

Note that writing a check is more effort than wiring funds between your account and the buyer's account. Be okay with that. It's simpler for a lender to document and track a personal check and it's good to make things simple for the bank.

Click here for a gift letter template and mortgage rates.

Step 3 : What The Receiver Of The Gift Needs To Do

Now that the gifter has handed, in the form of a check, a downpayment gift to the buyer, the following steps are required.

First, with the gift check in hand, the buyer should physically walk into a preferred depository bank (e.g.; Wells Fargo, Bank of America, Chase, Fifth Third) to make the deposit in-person. Do not deposit the check online using an iPhone or Android app, for example.

In addition, whichever bank into which you choose to deposit your gift money, make sure it's the bank account from which all of your money at closing will be drawn. You do not want to bring money to your closing from multiple savings accounts. This, too, can make things difficult on a bank and the goal is to keep things simple.

With your bank selected, then, do the following :

1. Deposit the gift funds into a bank account
2. End your transaction
3. Collect a receipt for your deposit

Under no circumstances should you "co-mingle" the gift deposit with other funds, or other gifts. The amount specified on your teller receipt should match exactly the dollar amount on the certified downpayment gift letter. If the amount is off by even a penny, the lender will likely reject your letter and the funds that came with it.

Note that if you are receiving multiple cash gifts for downpayment, you should follow this process for each gift independently. Again, do not co-mingle your gifts. Be guided by your gift letter.

Tax Notes On Cash Downpayment Gifts

It should be noted that there may be tax implications for givers of a cash gifts for downpayment, and receivers of them. These are items for your account.

Your lender will not report these cash gifts to the IRS; it's not the lenders responsibility to report such things. Your lender will use your gift letter(s) for underwriting only, ensuring that the mortgage meets its underwriting standards.

Click here for a gift letter template and mortgage rates.

Contact TheMortgageMark if you have any questions!   www.themortgagemark.com   mark@themortgagemark.com 

IRS Tip : This Simple Trick Will Boost The Size Of Your 2013 Mortgage Interest Tax Deduction

Looking for a way to reduce your federal tax liability? Consider making your January 2014 mortgage payment a few days early.

Homeowners who send their January 2014 mortgage payment before New Year's Day may benefit from a bigger mortgage interest tax deduction on their 2013 federal tax returns.

Click to skip to today's live mortgage rates.

Claim Your Mortgage Interest Tax Deduction

It's November and, within a few weeks, you'll receive your mortgage statement for January 2014. Study it, and you'll notice that the payment is split into as many as 4 separate parts :

1. Principal : A partial repayment on the original monies borrowed
2. Interest : Based on your mortgage rate, a payment for the right to borrow said monies
3. Tax : Partial payments of your annual tax
4. Insurance : Partial payment of your annual homeowners insurance bill

Together, these four parts are called "PITI" but it's the "interest" piece that's of most interest to homeowners. This is because U.S. federal tax code allows homeowners to claim mortgage interest as a tax-deduction in the year in which it was paid.

Today's homeowners can boost their 2013 mortgage interest tax deduction, therefore, by making their upcoming January 2014 mortgage payment before the calendar flips to January.

By making your payment in 2013, your lender will book interest paid to the tax year of 2013, and the extra interest paid will be added to your IRS Form 1098.

For homeowners paying mortgage insurance, the benefits are even bigger.

Mortgage insurance is a required part of all FHA and USDA mortgages; and is required for some conventional loans via Fannie Mae and Freddie Mac. Mortgage insurance insures the loan against default, and helps to keep low-downpayment loans available to U.S. homebuyers.

As part of the American Taxpayer Relief Act of 2012, mortgage insurance payments are tax-deductible for 2012 and 2013. Mortgage insurance is not tax-deductible in 2014, however.

If your current mortgage requires mortgage insurance, then, you can maximize your tax savings by paying the January 2014 mortgage early. 

Before You Pay Your Mortgage Early, Know The Pitfalls

Making your January mortgage payment a few days early does not come without caveats.

First, not every mortgage is eligible for mortgage interest tax deductions. The IRS outlines mortgage interest tax deduction eligibility on its website. You'll want to make sure your loan qualifies for mortgage interest tax deduction.

Second, because of the Alternative Minimum Tax (AMT), some tax filers find their normal, allowable tax deductions pared by the IRS -- including those deductions related to mortgage interest paid. The AMT may reduce the benefits of making January's mortgage payment in December.

Furthermore, remember that the bonus deduction applies to January's payment only.

The IRS allows you to make (and claim) January's mortgage payment in December because the payment is imminently due. Attempts to make your February payment will be in vain. Your lender will not accept your payment, and the IRS will not apply your deduction.

Lastly, remember to consult a tax professional before making a personal tax decision. Everyone's tax situation is unique and the advice offered may not apply to all taxpayers equally.

Click to get today's live mortgage rates.

Deadline Dates For 2013 Mortgage Interest Tax Deduction

If you plan to pay your January 2014 mortgage statement in 2013 in order to increase your 2013 tax deductions, it's wise to "do it early".

As the end of the year approaches, mortgage lenders are notoriously short-staffed as operations teams use vacation days and otherwise take days off of work.

Lenders typically require extra time to receive and process payments during the holidays. 

If you pay your mortgage electronically, or via auto-pay, have your check clear no later than Monday, December 23, 2013.

If you send your checks via mail, have your payment stamped and sent no later than Wednesday, December 18, 2013.

Take Extra Monthly Savings : See Refinance Rates

A larger tax deduction can save you money, and so can an outright refinance. Today's mortgage rates remain near historical lows and the government is currently sponsoring a bevy of "no appraisal" refinance programs.

These programs include HARP, the FHA Streamline Refinance program, the VA Streamline Refinance program, and the USDA Streamline Refinance, among others. 

See what today's low rates can do for your home. Get started with a rate quote today. They're available online, with no cost, and with no obligation whatsoever.

Click to get today's live mortgage rates.

Contact The Mortgage Mark with any questions!!   www.themortgagemark.com   mark@themortgagemark.com  

November 2013 Updates : FHA Streamline Refinance Mortgage Guidelines

November 2013 Updates : FHA Streamline Refinance Mortgage Guidelines (Plus Mortgage Rates)

NOTE : FHA Streamline Refinance information is accurate as of today, November 11, 2013. If you get your FHA Streamline Refinance information elsewhere online, it may be inaccurate or out-of-date. FHA mortgage guidelines change often.

What Is An FHA Streamline Refinance?

The FHA Streamline Refinance is a special mortgage product, reserved for homeowners with existing FHA mortgages. FHA Streamline Refinances are the fastest, simplest way for FHA-insured homeowners to refinance their respective mortgages.

The FHA Streamline Refinance program's defining characteristic is that it does not require a home appraisal. Instead, the FHA will allow you to use your original purchase price as your home's current value, regardless of what your home is actually worth today.

In this way, with its FHA Streamline Refinance program, the FHA does not care if you are underwater on your mortgage. Rather, the program encourages underwater mortgages. Even if you owe twice what your home is now worth, the FHA will refinance your home without added cost or penalty.

The "appraisal waiver" has been a huge hit with U.S. homeowners, allowing unlimited loan-to-value (LTV) home loans via the FHA Streamline Refinance program. Homeowners in places like Florida, California, Arizona and Georgia have benefitted greatly, as have homeowners in other states and cities affected by last decade's housing market downturn.

Beyond this "no appraisal" feature, however, the FHA Streamline Refinance behaves very much like any other loan product. It's available as a fixed rate or adjustable mortgage; it comes as a 15- or 30-year term; and there's no FHA prepayment penalty to worry about.

Another big plus is that FHA mortgage rates are the same in the FHA Streamline Refinance as with a "regular" FHA loans. There's no penalty for being underwater, or for having very little equity.

Check your FHA Streamline Refinance eligibility.

FHA Streamline : No Verification Of Job, Income, Credit

Another big plus is that the FHA Streamline Refinance is fairly easy for which to qualify.

Earlier this decade, in an effort to help U.S. homeowners, the FHA abolished most of the typical verifications required to get a mortgage. So, today, as it's written in the FHA's official mortgage guidelines :

1. Employment verification is not required with an FHA Streamline Refinance
2. Income verification is not required with an FHA Streamline Refinance
3. Credit score verification is not required with an FHA Streamline Refinance

There's no need for a home appraisal, either, so when you put it all together, you can be (1) out-of-work, (2) without income, (3) carry a terrible credit rating and (4) have no home equity. Yet, you can still be approved for an FHA Streamline Refinance.

That's not as crazy as it sounds, by the way.

To understand why the FHA Streamline Refinance is a smart program for the FHA, we have to remember that the FHA's chief role is to insure mortgages -- not "make" them.

It's in the FHA's best interest to help as many people as possible qualify for today's low mortgage rates. Lower mortgage rates means lower monthly payments which, in theory, leads to fewer loan defaults.

This is good for homeowners that want lower mortgage rates and for the FHA -- but mostly for the FHA.

Check your FHA Streamline Refinance eligibility.

Are You FHA Streamline Refinance Eligible?

Although the FHA Streamline Refinance eschews the "traditional" mortgage verifications of income and credit score, as examples, the program does enforce minimum standards for applicants. The official FHA Streamline Refinance guidelines are below. Note that not all mortgage lenders will underwrite to the official guidelines of the Federal Housing Administration.

Perfect, 3-Month Payment History Is Required

The FHA's main goal is to reduce its overall loan pool risk. Therefore, it's number one qualification standard is that homeowners using the Streamline Refinance program must have a perfect payment history stretching back 3 months. 30-day, 60-day, and 90-day lates are not allowed. One mortgage late payment is allowed in the last 12 months. Loans must be current at the time of closing.

Click for your personalized FHA Streamline Refinance mortgage rates.

210-Day "Waiting Period" Between Refinances

The FHA requires that borrowers make 6 mortgage payments on their current FHA-insured loan, and that 210 days pass from the most recent closing date, in order to be eligible for a Streamline Refinance.

Employment And Income Are Not Verified

The FHA does not require verification of a borrower's employment or annual income as part of the FHA Streamline process. There is no Verification of Employment, nor are there paystubs, W-2s or tax returns required for approval. You can be unemployed and get approved for a FHA Streamline Refinance so long as you still meet the other program requirements.

Credit Scores Are Not Verified

The FHA does not verify credit scores as part of the FHA Streamline Refinance program. Instead, it uses payment history as a gauge for future loan performance. This means that FICO scores below 640, below 620, below 580, and below 500 are eligible for Streamline Refis.

The Refinance Must Have "Purpose"

Streamline Refinance applicants must demonstrate that there's a Net Tangible Benefit in the refinance; a legitimate reason for refinancing. Loosely, Net Tangible Benefit is defined as reducing the (principal + interest + mortgage insurance) component of the mortgage payment by 5 percent or more. Another allowable Net Tangible Benefit is to refinance from an adjusting ARM into a fixed rate loan. Taking "cash out" to pay bills is not an allowable Net Tangible Benefit.

Loan Balances May Not Increase To Cover Loan Costs

The FHA prohibits increasing a Streamline Refinance's loan balance to cover associated loan charges. The new loan balance is limited by the math formula of (Current Principal Balance + Upfront Mortgage Insurance Premium). All other costs -- origination charges, title charges, escrow population -- must be either (1) Paid by the borrower as cash at closing, or (2) Credited by the loan officer in full. The latter is called a "zero-cost FHA Streamline". Click here for zero-cost FHA Streamline Refinance mortgage rates.

Appraisals Not Required

The FHA isn't concerned about home value -- it's insuring your loan regardless. Therefore, the FHA does not require appraisals for its Streamline Refinance program. Instead, it uses the original purchase price of your home, or the most recent appraised value, as its valuation point. Homes that are underwater are still FHA Streamline-eligible.

FHA Streamline Refinance Mortgage Insurance Requirements

The FHA Streamline Refinance is an FHA-insured mortgage, and FHA borrowers are required to make two types of mortgage insurance payments -- an upfront mortgage insurance payment paid at closing, plus an annual payment split into 12 installments, paid with your mortgage payment each month.

With respect to mortgage insurance premiums, homeowners using the FHA Streamline Refinance program are split into two classes :

1. Homeowners whose new loan replaces an FHA-backed mortgage endorsed prior to June 1, 2009
2. Homeowners whose new loan replaces an FHA-backed mortgage endorsed on/after June 1, 2009.

Homeowners in the first class -- those with "old" FHA mortgages -- pay markedly lower mortgage insurance than "new" FHA homeowners.

Check your FHA Streamline Refinance eligibility.

FHA Streamline Refinance MIP (For Loans Endorsed Before June 1, 2009)

If your existing FHA mortgage was endorsed prior to June 1, 2009, your mortgage insurance premiums have been "grandfathered". You can refinance via the FHA Streamline Refinance program and pay reduced rates for both for upfront MIP and your annual mortgage insurance premium.

Upfront Mortgage Insurance Premiums (UFMIP)

For an FHA Streamline Refinance that replaces a loan endorsed prior to June 1, 2009, the new FHA mortgage's upfront mortgage insurance is equal to 0.01 percent of the loan size, or 1 basis point.

For example, if your new FHA Streamline Refinance is for $100,000 mortgage, the FHA will assess a $10 upfront mortgage insurance premium (MIP) to be paid by you at closing. The FHA automatically adds the $10 payment to your new loan balance.

Annual Mortgage Insurance Premiums (MIP)

Annual MIP is similarly cheap for "old" FHA loans. For an FHA Streamline Refinance replacing an FHA loan endorsed prior to June 1, 2009, the annual MIP is 0.55% annually, or 55 basis points.

The complete annual MIP schedule is as follows :

• 15-year loan terms with loan-to-value over 90% : 0.55 percent annual MIP
• 15-year loan terms with loan-to-value under 90% : 0.55 percent annual MIP
• 30-year loan terms with loan-to-value over 95% : 0.55 percent annual MIP
• 30-year loan terms with loan-to-value under 95% : 0.55 percent annual MIP

15-year fixed rate mortgages with LTVs of 78% or less pay no annual MIP.

For an FHA Streamline Refinance which replaces a FHA loan endorsed prior to June 1, 2009 and for which the mortgage is a jumbo FHA mortgage (i.e. loan size exceeds $625,500), no additional mortgage insurance premiums are due.

Note : FHA jumbo loans over $625,500 are permitted in "high-cost" metropolitan areas only. This includes Montgomery County, Maryland; New York City, New York; and Fairfax County, Virginia.

Most of California, Hawaii and Alaska are FHA jumbo loan-eligible, too.

Click for today's FHA Streamline Refinance mortgage rates.

FHA Streamline MIP For Loans Endorsed On/After June 1, 2009

If you are refinancing an FHA mortgage via the FHA Streamline Refinance program and your existing FHA mortgage was endorsed on, or after, June 1, 2009, your mortgage insurance premium schedule on the new loan is as follows.

Upfront Mortgage Insurance Premiums (UFMIP)

For an FHA Streamline Refinance replacing a loan endorsed on, or after, June 1, 2009, the FHA upfront mortgage insurance premium is equal to 1.75 percent of your loan size, or 175 basis points.

This is $1,750 for every $100,000 borrowed. The FHA automatically adds the $1,750 premium to your loan balance for you -- it's not paid as cash. Furthermore, not all refinancing households will pay the full amount.

For FHA-backed homeowners refinancing within the 3 years of their existing loan's start date, the FHA provides a refund on previously-paid upfront MIP. The size of the refund diminishes as the 3-year window elapses.

For example, a homeowner who refinances an FHA mortgages after 11 months is granted a 60% refund on his initial FHA UFMIP. 30 days later, the refund drops to 58%. After another 30 days, it drops to 56%, and so on.

This is why is rarely a good idea to "wait to refinance" with the FHA. With the FHA Streamline Refinance program, the sooner you refinance, the bigger your refund, and the lower your total loan size. This lowers the monthly payment and preserves the home equity -- two huge positives.

You can review your own FHA mortgage insurance refund chart at top.

Check your FHA Streamline Refinance eligibility.

Annual Mortgage Insurance Premiums (MIP)

The annual MIP schedule for an FHA Streamline Refinance which replaces a loan from on, or after, June 1, 2009 is as follows :

• 15-year loan terms with loan-to-value over 90% : 0.70 percent annual MIP
• 15-year loan terms with loan-to-value under 90% : 0.45 percent annual MIP
• 30-year loan terms with loan-to-value over 95% : 1.35 percent annual MIP
• 30-year loan terms with loan-to-value under 95% : 1.30 percent annual MIP

Note, though, that jumbo FHA mortgages are subject to an additional MIP fee.

15-year fixed rate mortgages over $625,500 pay an additional 0.25 basis points annually. Loans with terms of 20 years or 30 years pay an additional 0.20 baiss points.

A Los Angeles, California homeowner, therefore, borrowing at the $729,750 local loan limit with a 30-year fixed rate mortgage will pay annual mortgage insurance premiums of 1.55% to the FHA, or $943 per month.

FHA MIP Cancelation Policy

For some FHA-backed homeowners, annual mortgage insurance premiums are temporary. The FHA makes this determination based on the amount of home equity at the time of closing.

For homeowners using the FHA Streamline Refinance to replaces a loan from on, or after, June 1, 2009, the FHA MIP cancelation schedule is as follows :

• Loan-to-value of 90% or less at the time of closing : MIP required for 11 years
• Loan-to-value greater than 90% at the time of closing : MIP required for life of loan

The FHA MIP cancelation policy is the same for 15-year loan terms as for 30-year loan terms.

Refinancing homeowners are welcome to reduce their loan balance at the time of closing to avoid paying MIP for the loan's life. In many cases, this will require an up-to-date appraisal of your home.

This FHA MIP cancelation policy applies to FHA loans beginning June 2013. Note that FHA MIP will also be canceled in the event of a refinance to a different loan program such as a conventional loan backed by Fannie Mae or Freddie Mac, or upon sale of the home.

Homeowners planning to move within 10 years may not be affected by the FHA's "Life Of The Loan" rule.

Apply For Your FHA Streamline Refinance Here

The FHA Streamline Refinance is among the easiest and best-valued mortgage products available.

If you have an existing FHA mortgage, get yourself a FHA Streamline Refinance rate quote. FHA mortgage rates are low and closings can occur in as few as 20 days. And, the faster you close, the bigger your FHA upfront mortgage insurance premium refund.

Click here to get a rate quote and start your FHA Streamline Refinance application today.

NOTE : FHA Streamline Refinance information is accurate as of today, November 11, 2013. If you get your FHA Streamline Refinance information elsewhere online, it may be inaccurate or out-of-date. FHA mortgage guidelines change often

Contact The Mortgage Mark with Any Questions!!   www.themortgagemark.com   mark@themortgagemark.com