What’s My Home Worth? Farmington Hills, Novi, Northville or Oakland County, Michigan

The Gift Of Housing This Season

tommygill7 Uncategorized Leave a Comment

Homebuyers often have difficulty gathering enough cash for their down payment and closing/settlement costs, so asking a parent, grandparent or relative to help by providing a tax-free gift may be a solution. As the end of the year quickly approaches, remember that tax-free gifts can be made once per calendar year. That means a gift late in 2016 can be repeated just weeks later in the new year to help you build savings for a home purchase early in 2017.    gift

For 2016, an individual is allowed to give up to $14,000 in cash (or valuables) to any other individual with no income-tax consequences for the donor. (Recipients never pay income taxes on gifts.) The individual’s spouse could also give up to $14,000 to the same person.

Use caution when buying a home that is on the short sale market. There are so many parties that are involved in this type of transaction that makes it easy for something to go wrong before you gain the deed to the home. Be prepared to lose the home that you think you may be winning at auction.

In addition, each person could give as much as $14,000 to the recipient’s spouse. In other words, your parents could give you and your spouse up to $56,000 this year ($28,000 + $28,000) with no tax consequences to them. That amount could be doubled by gifts made in 2017. (Gift limits often change annually; the limit for 2017 has yet to be announced.)

If you receive a monetary gift for a home purchase, bear in mind that your lender will want a gift letter including:

When buying, be sure to hire your own realtor and inspector. It’s often tempting to use the seller’s hired help to save a buck, but doing so can cost you more in the long run. The seller’s agent and inspector are looking out for the best interest of the seller, and you need someone who is looking out for only you.

Names of donor and recipient, and their relationship

Amount of gift

Before you begin looking for a home to buy, know what you can afford. There are many affordability calculators online that take various factors into account, but they are still only guidelines. You may prefer to spend a little less on a house payment to make sure one spouse can stay home with kids, or you might want to go a little higher to avoid having to move again in a few years.

Source of funds (bank account, etc.)

Reason for gift, including address of property being purchased

Discount brokers may be something to consider if you have the time to do the leg work when you are buying a house. They are much cheaper than a traditional broker but they do far less work for you. You will be responsible for setting up appointments to view homes and writing up your own sales contract. You will save money but work harder.

Statement specifying there is no expectation of repayment

About the Author

tommygill7

Have a question not answered here? Ask us!

Your email address will not be published. Required fields are marked *