A Gift to Remember

This Holiday Season, parents can give their adult children a gift to remember - their very  first starter home. Capstone Mortgage Company, a residential mortgage broker, offers many unique financing options. One such option is a minimal downpayment loan that requires only 5%. This program is limited to purchase transactions for single family primary residences and includes condominiums. In addition, the entire 5% downpayment can be a gift from a parent. Additional asset requirements, like two months of reserve assets, can also be satisfied with a parental gift.  

Loan approval is contingent upon the Borrower (i.e. the child) having

a. Minimum credit score of 720, and

b. A maximum Debt to Income (DTI) ratio of 41%

c. Maximum loan amount of $417,000

For example, a child could purchase a $260,000 starter home with a $13,000 gift (i.e. the  downpayment). A larger gift of approximately $22,000 would be required for the maximum loan amount of $417,000.

What are the tax consequences?  In 2013, each parent can give $13,000 to his/her child without being subjected to a federal gift tax. As such a child could receive a total of $26,000 in gifts from his/her parents.

This program is perfect for the first time homebuyer that needs financial assistance from his/her parents without obligating the parents for future mortgage payments. The parents are not co-signers on the loan. The loan is approved according to the child's creditworthiness. The child must posses a satisfactory credit history and be gainfully employed. Tim Malburg of Capstone Mortgage Company says "Eliminating the potential parental obligation is important since industry data shows that 4 out of 5 co-signers assume responsibility for monthly loan payments".  

If you have any questions contact Tim Malburg at Capstone Mortgage Company, Wilton, CT 203-834-6293, TWM41@aol.com