We talk to folks who don’t have quite enough money saved up for a down payment on their dream home, and they want to “Borrow” the money from their Family. Borrowing from the “Bank of Mom and Dad” sounds like a great idea, but in reality, you can’t do that.
It’s also a “no-no” to borrow the money for the down payment from your credit cards. But wait! Maybe you “know someone, who knows someone who actually did this.”
With the case of Family – you can easily get a GIFT for the down payment or closing costs and obtain FHA or Conventional financing. However, the family member giving the gift must state, in writing, that the gift does not have to be paid back. If, out of the goodness and kindness of your heart – you DECIDE to pay the money back, that’s besides the fact. The important thing is that there’s not a “second mortgage” made with your parents holding the note.
If you want to use “Family Money” to cover the closing costs for a USDA home loan, or a Veteran’s Home Loan- that’s cool too! Neither one of these programs require a down payment. Remember though, same rules apply – it must be a GIFT.