Written by:
Joanne Worobec – Loan Advisor – (636) 256-5705
The journey of marriage often marks the beginning of a new chapter filled with excitement, dreams, and shared aspirations. For many couples, one of the most significant milestones following the wedding is the purchase of their first home. However, the path to homeownership can be paved with financial hurdles, particularly when it comes to saving for a down payment.
While wedding gifts are typically used to kickstart the couple’s life together, they can also serve as a valuable resource for achieving homeownership. Thanks to evolving lending policies, newlyweds have an advantage when buying a home. They can use cash gifts received for their wedding toward the purchase. We’ll explore how this innovative strategy can turn cherished wedding gifts into the foundation of your future home.
Navigating the Process
Utilizing wedding gift funds for a down payment involves navigating certain procedures and documentation requirements. Conventional loans must be underwritten by Freddie Mac standards—one of the two main conventional loan agencies in the U.S. (the other being Fannie Mae, which does not yet allow wedding gifts). FHA, VA, and USDA also allow wedding gifts to be used for purchase funds.
To ensure a smooth process, make sure to follow the documentation process below:
- You must provide a copy of the marriage license or certificate.
- You must provide your bank statement (not the donor’s) showing the gift deposit and date.
- Wedding registries such as The Knot can be used.
- Funds must be deposited to the applicant’s account within 90 days of the marriage license/certificate.
- For physical checks and cash, try to deposit all at once.
- Submit a wedding invitation list, preferably in a data format such as Excel.
- Underwriters may request pictures of the deposited checks. Block out account numbers and donor names to protect donor privacy.
Wedding Gifts Allow for Flexibility and Support
One of the most significant advantages of using wedding gift funds for a down payment is the flexibility it offers. Unlike traditional gift funds, donors do not need to be related to the borrower. This opens the door for contributions from a wide circle of friends and acquaintances. Anyone besides an interested party in purchasing a home can give the gift.
Additionally, the absence of stringent requirements, such as providing the donor’s bank account information or a formal gift letter, streamlines the process, reducing paperwork and simplifying the transaction. This flexibility empowers couples to pursue their homeownership dreams and underscores the supportive network surrounding them as they embark on this journey together.
A family member who was going to give a down payment gift can save themselves some paperwork by contributing funds within 90 days of the wedding.
Additional Down Payment Considerations
There are many federal and state programs that can also assist with the funds necessary for a down payment. A common misconception is that you NEED 20% down to purchase a home, but that is inaccurate for many options. The minimum amount required varies by loan type and can be as low as 3.5% or even 0 if you are a Veteran or buying a USDA-eligible property.
Additionally, many states offer state and even county-specific programs that can assist with some of the costs. Missouri, Illinois, and Kansas all have programs that buyers can utilize to ease the cost burden of their down payment.
Like wedding gifts, college graduates can also use graduation gifts for a down payment. Recent college graduates can begin their homeownership journey, even with a limited job history.
As newlyweds embark on the journey of marriage, the prospect of homeownership can loom large on the horizon. By leveraging wedding gift funds, budgeting, and other down payment strategies, couples can transform the generosity of their loved ones into the cornerstone of their future home. So, as you say “I do” to a lifetime of love and partnership, remember that your dream home may be closer than you think, thanks to the generosity of those who celebrate your union.