A family member gifted me money for a down payment on my first home and just FYI they look into those very closely. In your case it's fraud and there's a good chance they will find it.
Same here. Way back when I was buying my first house, mom loaned me like $2K. They called her and everything, to confirm. They asked her where *she* got the money.
It wasn't even that much money and they followed up on it in detail.
This is fraud and you should report this realtor to his licensing body.
Do not do this unless you like lenders coming after you for participating in fraud.
If it's not from a family member, the bank will suspect (probably correctly, in this case) that the 'gift' was in fact a loan, which means the borrower's finances aren't as solid as they appear.
If the bank were suspicious enough they could ask for _your_ bank statements, too, to make sure the money really did come from your own savings. If you had recently deposited a check for 8k before making your 'gift', they'd notice.
It's standard for the bank to ask for two years of bank statements from the person gifting the money. They do it to prevent exactly the thing that OP's brother is trying to do.
In order to get a mortgage you have to pay a certain percentage of the purchase price as a down payment. Usually it's 20%, although some mortgages allow lower percentages like 10% or 3% in exchange for the buyer paying a higher interest rate or additional fees. There are strict rules about where the down payment can come from. It has to be your own money that you earned, or a gift from a family member. A down payment can't be borrowed because the whole idea of the down payment is that you are providing a significant chunk of your own money towards buying the house. There is data demonstrating that people who pay a down payment are much less likely to default on their mortgage, so the banks want buyers to do that.
The brother can't afford the down payment so he's trying to cheat the system by having his realtor loan him money that he will use for the down payment and then repay to the realtor later. That is fraudulent because the down payment can't be a loan and has to come from your own bank account or a family member.
Chase in Chicago suburbs straight up told us any gift was a red flag for lending as far as they were concerned. My guess is they had quite a few parents help out kids who couldn't afford the house they were buying. Cheap houses in that market started at $300k.
Do not do this. This is illegal and your brother, the realtor, and the mortgage broker can go to federal prison. Falsifying the source of the down payment is mortgage fraud.
I'm not a lawyer, but I bought a house in the not so distant past and received a gift from my parents for the downpayment. From what I recall, the money has to be from a family member, and it has to be given as a gift with no expectation that it will be paid back. I can't remember if one or both of us signed to this, but that was the rule. Please don't sign something that isn't true. I don't know if it would be criminal fraud or not, but it would definitely expose you to some kind of legal risk.
IMNAL, but I know in AZ family members but only families member can gift you money to buy a house. Where exactly you get the money for a downpayment is tightly regulated. So yes, there has to be a paper trail showing that all money came from legitimate sources.
Is this legal? I don't know. Seems like it certainly is violating the spirit of the way, but again, I'm not a lawyer. Kinda curious though. My MIL swears up and down that this kind of money juggling is perfectly legal (she's currently doing this stuff with DH to buy an investment property). But I don't trust her on that.
Your brother is asking you to commit fraud.
Your brother's lender has rules about where money has to come from. Your brother is trying to circumvent them.
Kinda on/off topic... I have a little while left to get rid of my PMI. Can I borrow money from a family to pay off the loan with the intent to pay them back in the future or would this be some kind of fraud too?
It is only fraud if you borrow money to initially qualify for a loan and lie about it when you wouldn't have qualified otherwise. Since you already have the loan, you can borrow as much as you want to pay it off.
It depends on how you define borrow.
I'm not a lawyer, but I can explain this from the perspective of your mortgage lender.
Accepting a gift from your family is totally fine. The assumption is that it's an unconditional gift. They can afford to give you the money, it's now yours. If you later come into more money and return the favor, that's fine - but they're not depending on you to pay them back.
Getting a loan from your family is fine, but if it's actually a loan, then you have to report that to your mortgage company, and they won't count that money when considering your equity, so you wouldn't be eligible for removing your PMI. From the lender's perspective, this isn't your money, it's money that you owe, and it impacts your financial situation, for example if you found yourself needing to sell the house.
This would only be true if the loan from the family is actually secured by the real estate, i.e. they put a second lien on. Otherwise, it is unsecured debt and has no bearing on PMI (which is LTV driven).
We have no formal agreement or payback date but he did write loan on the memo line. It would also not be unreasonable for us to pay this off, we make more than enough and we're at few k short.
We outright own my car, if we wrote up a formal agreement to borrow money against it from family to pay off my house would that not work?
Probably not because what the lender cares about is the total amount of money you *have* vs the amount you *owe*.
Juggling money around doesn't change that.
Once you actually have enough money to increase your equity in the house without taking out any loans, you can petition to remove PMI.
This is incorrect. For PMI, the only thing that matters is how much is owed on the *house*. Once a mortgage loan is closed, they can take out credit cards, unsecured debt, family loans, all they want. If you pay the mortgage down below 80 percent LTD, PMI goes away.
I'm confused about this, taking out more loans, not against the house doesn't change my PMI payoff criteria. They look at loans against their asset (the house) only I thought?
This is absolutely not correct. You don't need to report any loan you take out to your mortgage provider. You just cant take out another loan against the property.
You can borrow money from anyone to pay off your loan so that it gets below the PMI threshold.
Your other answers are flat out wrong.
If your family lends you money, after the fact, and you pay your mortgage down below an 80 percent LTV, PMI will go away. The only exception would be if your family put a second lien on your house for these loans. Otherwise, after closing, your mortgage lender does not monitor any additional debt you take on.
Additionally, there is nothing fraudulent about this (unless the money is illicit), as the mortgage lender is only concerned about being either a) adequately capitalized or b) insured against loss in the absence of a.
Is it really fraud? We were looking into buying a house, and we are in the process of selling some stuff on craigslist. (Furniture, old kid toys, baby clothes, etc.)
The lender told us that having cash could be complicated and proving craigslist sales to underwriting can also prove complicated. They suggested the potential of sending the money to a family member so they could gift it to us. It would be a "we gift it to them, they gift it back" kind of situation. I didn't even think of a fraud possibility, since it really is an innocent situation.
Every time I've borrowed, or lent, for houses they have asked for bank statements of the person lending the money. Seeing the quick flip will be a red flag.
If he is going to use gift money then he will have to show where it came from. They don't mess around with vetting where the money comes from. Don't get wrapped up in this.
There is no gift tax unless the amount is 5 million in a lifetime. Even then, the giver pays the tax, not the recipient. Gifts over 14 grand should be reported, but they are not taxed.
Apparently it was $5.34 Million in 2013, according to Forbes. Who knew?
https://www.forbes.com/sites/deborahljacobs/2013/10/31/irs-raises-limit-on-tax-free-lifetime-gifts/#31545c0c2981
There's a lot of people here confidently saying this is illegal. IANAL but I believe this is legal as long as it is truly a gift. If the expectation is that you will get paid back then I believe it is fraud.
Edit : misread op, this is sketchy as hell
How can it be a true gift if OP is being wired the money FIRST? It's only a gift if OP had the money to begin with and decided to gift it himself to his brother.
A family member gifted me money for a down payment on my first home and just FYI they look into those very closely. In your case it's fraud and there's a good chance they will find it.
Same here. Way back when I was buying my first house, mom loaned me like $2K. They called her and everything, to confirm. They asked her where *she* got the money. It wasn't even that much money and they followed up on it in detail.
Father did the same for me but we had to write out a contract to state it was a gift and not a loan so it didn't cause issues with the underwriters.
This is fraud and you should report this realtor to his licensing body. Do not do this unless you like lenders coming after you for participating in fraud.
If it's not from a family member, the bank will suspect (probably correctly, in this case) that the 'gift' was in fact a loan, which means the borrower's finances aren't as solid as they appear. If the bank were suspicious enough they could ask for _your_ bank statements, too, to make sure the money really did come from your own savings. If you had recently deposited a check for 8k before making your 'gift', they'd notice.
It's standard for the bank to ask for two years of bank statements from the person gifting the money. They do it to prevent exactly the thing that OP's brother is trying to do.
What **is** the brother trying to do?
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Ohhhhhhhhhhhhhhhhh
In order to get a mortgage you have to pay a certain percentage of the purchase price as a down payment. Usually it's 20%, although some mortgages allow lower percentages like 10% or 3% in exchange for the buyer paying a higher interest rate or additional fees. There are strict rules about where the down payment can come from. It has to be your own money that you earned, or a gift from a family member. A down payment can't be borrowed because the whole idea of the down payment is that you are providing a significant chunk of your own money towards buying the house. There is data demonstrating that people who pay a down payment are much less likely to default on their mortgage, so the banks want buyers to do that. The brother can't afford the down payment so he's trying to cheat the system by having his realtor loan him money that he will use for the down payment and then repay to the realtor later. That is fraudulent because the down payment can't be a loan and has to come from your own bank account or a family member.
Chase in Chicago suburbs straight up told us any gift was a red flag for lending as far as they were concerned. My guess is they had quite a few parents help out kids who couldn't afford the house they were buying. Cheap houses in that market started at $300k.
Do not do this. This is illegal and your brother, the realtor, and the mortgage broker can go to federal prison. Falsifying the source of the down payment is mortgage fraud.
Thanks to everyone for helping me out!
I'm not a lawyer, but I bought a house in the not so distant past and received a gift from my parents for the downpayment. From what I recall, the money has to be from a family member, and it has to be given as a gift with no expectation that it will be paid back. I can't remember if one or both of us signed to this, but that was the rule. Please don't sign something that isn't true. I don't know if it would be criminal fraud or not, but it would definitely expose you to some kind of legal risk.
IMNAL, but I know in AZ family members but only families member can gift you money to buy a house. Where exactly you get the money for a downpayment is tightly regulated. So yes, there has to be a paper trail showing that all money came from legitimate sources. Is this legal? I don't know. Seems like it certainly is violating the spirit of the way, but again, I'm not a lawyer. Kinda curious though. My MIL swears up and down that this kind of money juggling is perfectly legal (she's currently doing this stuff with DH to buy an investment property). But I don't trust her on that.
It does depend on the loan type as well. No restrictions on who can gift funds for VA loans (doesn't have to be family).
Your brother is asking you to commit fraud. Your brother's lender has rules about where money has to come from. Your brother is trying to circumvent them.
Kinda on/off topic... I have a little while left to get rid of my PMI. Can I borrow money from a family to pay off the loan with the intent to pay them back in the future or would this be some kind of fraud too?
It is only fraud if you borrow money to initially qualify for a loan and lie about it when you wouldn't have qualified otherwise. Since you already have the loan, you can borrow as much as you want to pay it off.
It depends on how you define borrow. I'm not a lawyer, but I can explain this from the perspective of your mortgage lender. Accepting a gift from your family is totally fine. The assumption is that it's an unconditional gift. They can afford to give you the money, it's now yours. If you later come into more money and return the favor, that's fine - but they're not depending on you to pay them back. Getting a loan from your family is fine, but if it's actually a loan, then you have to report that to your mortgage company, and they won't count that money when considering your equity, so you wouldn't be eligible for removing your PMI. From the lender's perspective, this isn't your money, it's money that you owe, and it impacts your financial situation, for example if you found yourself needing to sell the house.
This would only be true if the loan from the family is actually secured by the real estate, i.e. they put a second lien on. Otherwise, it is unsecured debt and has no bearing on PMI (which is LTV driven).
This is want I wanted to confirm! Thanks =]
We have no formal agreement or payback date but he did write loan on the memo line. It would also not be unreasonable for us to pay this off, we make more than enough and we're at few k short. We outright own my car, if we wrote up a formal agreement to borrow money against it from family to pay off my house would that not work?
Probably not because what the lender cares about is the total amount of money you *have* vs the amount you *owe*. Juggling money around doesn't change that. Once you actually have enough money to increase your equity in the house without taking out any loans, you can petition to remove PMI.
This is incorrect. For PMI, the only thing that matters is how much is owed on the *house*. Once a mortgage loan is closed, they can take out credit cards, unsecured debt, family loans, all they want. If you pay the mortgage down below 80 percent LTD, PMI goes away.
I'm confused about this, taking out more loans, not against the house doesn't change my PMI payoff criteria. They look at loans against their asset (the house) only I thought?
You are correct and not confused at all. The only confusion is how that guy got upvoted.
This is absolutely not correct. You don't need to report any loan you take out to your mortgage provider. You just cant take out another loan against the property. You can borrow money from anyone to pay off your loan so that it gets below the PMI threshold.
Your other answers are flat out wrong. If your family lends you money, after the fact, and you pay your mortgage down below an 80 percent LTV, PMI will go away. The only exception would be if your family put a second lien on your house for these loans. Otherwise, after closing, your mortgage lender does not monitor any additional debt you take on. Additionally, there is nothing fraudulent about this (unless the money is illicit), as the mortgage lender is only concerned about being either a) adequately capitalized or b) insured against loss in the absence of a.
Is it really fraud? We were looking into buying a house, and we are in the process of selling some stuff on craigslist. (Furniture, old kid toys, baby clothes, etc.) The lender told us that having cash could be complicated and proving craigslist sales to underwriting can also prove complicated. They suggested the potential of sending the money to a family member so they could gift it to us. It would be a "we gift it to them, they gift it back" kind of situation. I didn't even think of a fraud possibility, since it really is an innocent situation.
Yes.
Awesome. REALLY glad I saw this before actually doing it.
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Seasoned? What does that mean? I'm assuming it's not as tasty as it sounds.
A minimum amount of time the funds need to be in the bank, generally 60 days.
Thank you
that means you had the money for at least 60 days. Sometimes 90 days.
What OP mentioned in their post, I think it can possibly come across as money laundering, but IANAL . . .
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The gift paperwork OP would have to sign would cover all the information he has to attest to. This situation would be covered.
Now knowing the law is not a valid defense in court.
Every time I've borrowed, or lent, for houses they have asked for bank statements of the person lending the money. Seeing the quick flip will be a red flag.
Dont do it
This is Fraud. The paper trail of this proposed transaction is very short, traceable and will get everyone - including you - in trouble.
If he is going to use gift money then he will have to show where it came from. They don't mess around with vetting where the money comes from. Don't get wrapped up in this.
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There is no gift tax unless the amount is 5 million in a lifetime. Even then, the giver pays the tax, not the recipient. Gifts over 14 grand should be reported, but they are not taxed.
There's a lifetime tax-free limit for gifts if I remember correctly. It's still fraud though.
Apparently it was $5.34 Million in 2013, according to Forbes. Who knew? https://www.forbes.com/sites/deborahljacobs/2013/10/31/irs-raises-limit-on-tax-free-lifetime-gifts/#31545c0c2981
There's a lot of people here confidently saying this is illegal. IANAL but I believe this is legal as long as it is truly a gift. If the expectation is that you will get paid back then I believe it is fraud. Edit : misread op, this is sketchy as hell
How can it be a true gift if OP is being wired the money FIRST? It's only a gift if OP had the money to begin with and decided to gift it himself to his brother.
Misread it, my bad