For first-time homebuyers, breaking into the housing market can be daunting. The median sales price has risen to $498,700 as of February 2023 — a 5% increase, according to US Census Bureau. And in some communities, price increases were much higher.
If you’re planning to buy a home, you may be waiting to save enough for a down payment. We realize it can be challenging to save a 20% down payment, especially as sales prices rise.
Fortunately, the Down Payment Assistance Program from Justice Federal provides opportunity for first-time homebuyers to purchase a home with as little as 3-5% down. And the down payment may be money gifted!
The definition of a first-time buyer might surprise some people. Sure, it’s someone who has never bought a home; however, applicants are considered first-time homebuyers if they haven’t owned a home for the past three years.
Gifted Down Payment
A gifted down payment is a cash gift you use to pay for some or all your mortgage down payment that is provided typically by relatives or friends. For example, a family member gifts you enough money to make a 3% to 5% down payment.
Depending on the type of home loan you apply for, and how much money you received, several factors will determine whether you can use the gifted money toward your home purchase.
3% Down Mortgage Loan Program
Benefits and qualifications include:
• 97% mortgage financing
• Flexible down payment source allowed, including gifts
• 30 Year Terms*
• Flexible Debt-to-Income
• No origination fees
• Must be a single-family, one-unit home
• Maximum sales price – conforming loan limit $726,200
5% Down Mortgage Loan Program
Benefits and qualifications include:
• 95% mortgage financing
• Flexible down payment source allowed, including gifts
• 30 Year Terms*
• Flexible Debt-to-Income
• No origination fees
• Must be a single-family, one-unit home
• Maximum sales price – high balance loan limit $1,089,300
Using Gifted Money for a Down Payment
Most conventional mortgage loans allow homebuyers to use gifted money for their down payment and closing costs if it's a gift from an acceptable source, such as from family members defined as follows:
• Parent
• Children (including adopted, step and foster children)
• Sibling (including stepsibling, foster and adopted siblings)
• Grandparent (including great-grandparents, step, and foster grandparents)
• Aunt and uncle (including great, step and foster aunt or uncle)
• Niece or nephew (including step-niece or nephew)
• Cousins (including adopted and stepcousins)
• In-laws (including parents and grandparents, aunt, uncle brother- and sister-in-law)
• Domestic partner
• Fiancé
Stipulations for Using Gifted Money for a Down Payment
When you use gifted funds, you will be requested to provide a gift letter. A down payment gift letter proves the down payment gift is a legitimate gift and there's no expectation of repayment. This is required by mortgage lenders. The mortgage gift letter must be dated and signed by both the giver and the recipient. It should include:
• Recipient's name
• Name and contact details of the individual (gifter)
• Address of the property being purchased
• Details about the relationship between the individual (gifter) and the recipient
• Total amount of gifted money
• Source of the gift funds
• A clear statement that the money is a gift, not a loan, and the gift will not need to be repaid
Gifted Down Payment Advantage
One of the biggest advantages of receiving down payment gift money is that you can come up with a down payment more quickly, putting you one step closer to homeownership, and keeping your cash in hand!
Get Cash Rewards with HomeAdvantage®**
Members that buy or sell using a HomeAdvantage Agent can earn on average $2,200 in Cash Rewards at closing!
Homeowners Insurance Without the Hassle
When closing on your home, you’ll need Homeowners’ Insurance. Your TruStage Member benefit offers homeowners insurance from Liberty Mutual. Get a quote in minutes online and benefit from dedicated customer support 24/7, when you call 800.813.0827.
We're Here to Help You Every Step of the Way
To learn more about how we can help you realize homeownership using your Member benefits, contact a Justice Federal Mortgage Representative today.
