Gifts
If you are having trouble saving enough
money, many lenders will allow you to
use gift funds for the down payment--as
well as for related closing costs. The
gift may come from family, friends or
other sources, but remember that lenders
usually require a "gift letter"
stating the gift doesn't have to be
repaid. In addition, some lenders will
also require you to pay at least a portion
of the down payment with your own cash.
Thus, if you plan to use gift money
to purchase your house, ask your lender
about their policies regarding gifts.
Earnest
money
Buyers are usually required to deposit
earnest money with the seller when they
make an offer. If the offer is accepted,
the earnest money is then credited towards
the down payment. The amount varies
widely depending on the seller and local
custom, but be prepared from the outset
to have funds earmarked for this purpose.
Don't
forget closing costs
In addition to the down payment, you
will also need to save for additional
fees associated with the loan. Known
as closing costs, these charges cover
items such as title insurance, documentary
stamps, loan origination fees, the survey,
attorney's fees, etc. When you submit
your loan application, lenders are required
to supply you with a good faith estimate
of your closing costs.
Some
buyers are surprised by the amount of
the closing costs, which can easily
run into the thousands of dollars. Remember,
though, that closing costs can be negotiated
with the seller. For example, you may
agree to pay the full asking price in
exchange for the seller paying all the
allowable closing costs.
