From Wedding Bells to Doorbells

From Wedding Bells to Doorbells

As you celebrate one of the most important days of your lives, your friends and families are excited for your adventure and want to help you begin your life together. Why not help you on your way with the wedding present of your dreams – a new home!

Etiquette & Tips

Traditionally, a registry is for items to be used in your home, such as kitchen appliances, cookware, home décor, serving plates or other home essentials. It could feel odd to request money instead of more traditional items, but popular wedding websites like The Knot and Zola are seeing more and more couples use their registries for cash gifts to be used towards home or honeymoon funds. This could be due to the higher interest rates and home prices we are currently seeing in today’s market, making cash requests more acceptable. Couples getting married later in life and discovering they already own many household belongings may also contribute to this.

If you’re skeptical, then you could include a small home registry, allowing for guests to celebrate your big day the traditional way. You could also keep this cash request for your closest friends and family only. According to popular wedding planning website Zola, it’s recommended that couples keep requests for cash off their wedding invites, opting to share the address to their wedding website instead.

If you’re planning to ask for money towards a down payment as your wedding gift, you should specifically state how you’re planning to use the money. Incorporate details as to why owning a home is important to you and your partner, the impact it could have on your life together, and how every little bit helps – whether it’s $20 or $1,000!

Documentation of gift funds is needed if you plan to purchase a home shortly after receiving the funds. Typically, your lender will need to source any gift funds received at least 60 days prior to your home’s purchase. Gift funds can be documented through a gift letter. This letter must show the donor’s name, address and telephone number, specific the dollar amount of the gift, state the nature of the donor’s relationship to the borrower and that no repayment is required. Keep in mind, as of 2022, an individual can donate up to $16,000 to any one person without incurring a gift tax. This is important information to share with your guests or family members.

Using Gift Funds for Down Payment and Closing Costs

In most cases, gift funds can be used as a full or partial down payment, or to pay closing costs. However, this varies by loan type. Speak with your lender directly to learn more.

Conventional Loans

• Eligible donors: Relative, domestic partner, individual engaged to marry the borrower, former relative, Godparent, or relative of domestic partner. Borrower cannot receive the gift from anyone invested in the transaction, such as the builder, developer, or real estate agent.
• Guidelines: Primary residence and second home purchase only. Minimum borrower investment of 5% is required for 2-4 unit primary residence or second home if Loan-to-Value (LTV) is greater than 80%. Cash on hand is not an acceptable source of donor funds.
• Documentation needed: Gift letter and evidence of transfer of funds.

FHA Loans

• Eligible donors: Family member, employer or labor union, a close friend with a clearly defined interest in the borrower, a charitable organization, or a governmental agency assisting low/middle-income families or first-time buyers. You cannot receive the gift from anyone invested in the transaction, such as the builder, developer, or real estate agent.
• Guidelines: Primary residence 1-4 unit only. No borrower funds are required for down payment. Cash on hand is not an acceptable source of donor funds.
• Documentation needed: Gift letter and the lender must document the gift funds from donor to borrower. If the gift funds have been verified in the borrower’s account, then the donor’s bank statement showing the withdrawal and evidence of the deposit into the borrower’s account is needed. If the gift funds are not verified, the certified check, money order, cashier’s check, wire transfer or other official check evidencing payment to the borrower or settlement agent is needed, as well as the donor’s bank statement evidencing sufficient funds for the amount of the gift.

VA

• Eligible donors: Any person who does not have interest in the sale of the property (seller, builder, real estate agent, etc.).
• Guidelines: Cash on hand is not an acceptable source of donor funds.
• Documentation needed: Gift letter, evidence of the borrower’s deposit or a copy of the donor’s funds by check/electronic transfer, or the CD showing receipt of donor’s funds.

USDA

• Eligible donors: Any person who does not have interest in the sale of the property (seller, builder, real estate agent, etc.).
• Guidelines: Gift funds may be used toward down payment or closing costs. May not be used as reverses. Cash on hand is not an acceptable source of donor funds.
• Documentation needed: Gift letter, evidence of funds from party providing the gift, evidence the funds were deposited in the borrower’s account.

General list of documentation needed and guidelines provided. Additional documentation and guidelines may be required. Contact your lender directly.

Conclusion

If you’re newly engaged, consider whether or not you’d want to include a home fund on your registry. Crowdfunding websites like Zola, Honeyfund and Feather the Nest allow for cash wedding registries and can even help you document the funds coming in. If you are not ready to accept gift funds for your new home, keep in mind that you may be eligible for down payment assistance programs or an affordable loan that requires no down payment. Contact a lender directly to learn more!

Additional Sources: Fanniemae.com, Hud.gov

The information contained herein (including but not limited to any description of Coastal Towne Mortgage, its affiliates and its lending programs and products, eligibility criteria, interest rates, fees and all other loan terms) is subject to change without notice. This is not a commitment to lend. Coastal Towne Mortgage is not a tax consultant. Contact your tax advisor for more details.