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Down Payment Gifts: Not just for first-time homebuyers

Can my family give me the money for a down payment on a home purchase in Massachusetts?

Absolutely! As a matter of fact, according to IRS guidelines for 2018, anyone can give another person – family or not – up to $15,000 per year without having to file a gift tax return.

This means that mom and dad can jointly give you up to $30,000, or jointly give you and your spouse up to $60,000 for your down payment with no additional tax filing requirement. You can also receive gifted funds totaling more than your down payment amount. Just make sure each gift giver knows that any amount over their IRS limit requires them to file a gift tax return.

With home prices soaring, first-time homebuyers aren’t the only people using down payment gifts. In the Massachusetts market, it’s not uncommon for homeowners to use gifted funds to upsize, relocate, or even buy a second or vacation home.

Thinking of using gifted funds for your down payment? Keep these critical points in mind:

  • If the person gifting you funds expects to be paid back, that’s not a gift — and it’s not going to fly if you’re working with a lender.
  • Even though the IRS says anyone can give you money, if you’re applying for a FHA, VA or Mass Housing loan, the gifted funds MUST come from a family member.
  • If you use gifted funds for your down payment, your lender will need to know the details. Requirements will vary, but at the very least, you’ll need to provide:
  • A signed gift letter from your donor confirming the amount of the gift, and that this amount is indeed a gift and not a loan to be repaid.
  • A copy of the bank statement for the account that was the source of the gifted funds.

Buying a home in Massachusetts? Get the legal help you need. For more information, contact J.Blumen & Associates 781-784-2500.