You can always choose to use gift fund for your downpayment. Here is a list of general guidelines for regular conventional loans and FHA home loans. Remember, all banks have different guidelines. Their requirements can be slightly different from one bank to another.
- If your loan to value (loan amount divided by the purchase price) is less than or equal to 80%, you are allow to use up to 20% in gift fund for downpayment.
- If your loan to value is over 80%, you are still allowed to use gift fund for your downpayment. However, a minimum of 5% of your purchase price must be your own fund. For example, if your purchase price is $100,000 and you are borrowing 85% in loan to value, you must put down at least $5,000 of your own fund. The rest of the down payment $10,000 can be a gift (Purchase Price $100,000 – Loan amount $85,000 – own fund $5,000)
Since loan to value can be as high as 96.50% of your purchase price, the 3.5% downpayment can be all gifts (good news right?)
Now you know the general guidelines for gifts, here is what the banks will ask from you: