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New here and a couple questions (loan related)
Hi all! I usually hang out over on MM, but since we're looking to buy a home this summer/fall, I thought I'd pop over. I do have a few preliminary questions...
1. How long is a pre-approval good for? For example, let's say we get pre-approved, but don't find a home in the timeframe. I'm assuming you have to go through the pre-approval process again?
2. We have nearly 20% saved of our target price point, however, DH's parents are giving us an additional 20K towards our house (it was part of an agreement when he chose to go to a college that he received nearly full scholarships to rather than a private school they would have paid $$$ for out of pocket). Anyway, I thought I had read something about being gifted money for a downpayment and that it can be looked at as a negative. I don't really know what my question is, but can anyone elaborate if this is the case?
Thanks in advance and I look forward to being here!
Re: New here and a couple questions (loan related)
The pre-approval is good for 90 days - if you don't find anything in that time frame, they just have to run your credit report again to make sure nothing has changed. It's not a hard process at all.
We also have gift money, and it's fine. It's only looked badly upon if it's a loan. DH's parents will need to write checks to each of you for half the total amount. Anything over $13,000 to one person in a year will trigger a gift tax that they would have to pay. They can give each of you a portion under $13,000 to avoid that. If they give it to you within 60 days of applying for your mortgage (not pre-approval), they will need to sign a letter explaining that the money is a gift not intended to be paid back. All parties will have to sign it. Most banks only look at the last two months of bank account history so if you get it before that time frame kicks in it should just register as being your money outright.
My standard advice to all buyers is to make sure you still have a good emergency fund in place after closing. Also have in hand in addition to closing costs the moving expenses, start up costs, repair/renovation costs, additional furniture/applicances, decorating as well as yard items, tools, ladders etc.
You may need a letter from the ILs stating that the money is a gift, not a loanb.
I assume since you have nearly 20% of the purchase price, you are looking at conventional financing. Gift funds are not a problem so long as at LEAST 5% is coming from your own funds, and proper documentation. FHA is more liberal with gift funds as long as it comes from an approved source.
You will need to obtain a gift funds letter from your lender and it will need to be signed by you and your ILs. You will also have to provide bank statements showing the gift funds going into your account from the donor's account. ILs will also need to provide bank statements showing the funds moving out of the account, and if they are writing you a check, copy of front and back of that. DO NOT have them hand it to you in cash. If they are liquidating the funds from, say, a retirement account, they are going to need to provide proof that is where the money came from.
You could avoid a LOT of this documentation if they give you the gift funds way in advance of your preapproval or signing a contract. The funds will be seasoned in your account and you will not have to provide this documentation. However, if the gift funds show up on your bank statements, all the above will apply. You will need 1-2 months bank statements for underwriting purposes.