How can my family help me get a first home?

Members of your family definitely can help you buy your first home. In fact, there are several methods that allow family members to help. 

Some methods include gifts, loans, co-signing and purchasing jointly with you. Your financial situation, including your credit score and debt-to-income (DTI) ratio, will help determine which method will work best. 

If you have some of the details figured out and are ready to get started on your homebuying journey, apply now! 

You can get help from your family for purchasing a home in a number of ways. Here are a few questions you'll need to answer. 

Many mortgage programs allow you to use gift money for your down payment, provided it comes from a relative, close friend, employer or charitable organization. 

Some lenders do require you to follow certain down payment gift rules. Lenders typically require a gift letter from the donor confirming that the money is a gift rather than a loan. If you receive that kind gift funds, you’ll need to document it for your lender. That’s where a gift letter comes into play. 

A gift letter certifies that your family member is giving you money for some or all of your down payment or closing costs. This note must state clearly that gifted funds are not a loan. 

Gift letters are usually submitted using a standardized form. Your bank or lender should be able to provide a mortgage gift letter template. Even with the template, you’ll want to familiarize yourself with the information required in these documents. 

• Donor’s name 

• Donor’s relationship to borrower 

• Gift money amount 

• Name of the bank or credit union 

• Type of account 

• Account number 

• Donor’s contact info 

• Donor’s signature 

• Borrower’s signature 

Lender guidelines for this paperwork can vary depending on the type of loan. Be sure to check with your lender about specific requirements and limitations related to gift funds. 

If you are looking for a loan but don’t meet credit requirements, bringing in a co-signer could help you meet requirements. 

Lenders will consider a co-signer’s credit history if yours does not meet the minimum score. If you are unable to keep up with payments, lenders can turn to the co-signer for payment.  

Loans with a co-signer usually follow the same process as loans without a co-signer. 

As the primary borrower, you will receive the full amount of your loan to use toward your home purchase. Co-signers will not have access to loan funds and aren’t on the hook for monthly payments.  

Co-signers are responsible for payments only when the primary borrower is unable to make them. 

You can borrow money from family members for a down payment or other expenses. However, because there can be tax implications related to a loan of this type, it will need to be documented. You will also likely need to pay a certain amount of interest on the loan. 

A joint mortgage loan can allow you and your family members to pool your incomes.  

A joint mortgage can help you qualify for a larger loan and possibly more affordable interest rates. But be sure to weigh the benefits against your ability to handle monthly payments and commit to a mortgage agreement with another borrower. 

Can family help me pay off debts?

High-interest credit card and personal loan debt can affect your ability to qualify for a home loan. 

Lenders will review your credit score and debt-to-income (DTI) ratio when you apply for a mortgage. Family members can assist you in improving your DTI by helping to pay off those debts. 

Homes that need work can sometimes cost a lot less to purchase. But then how do you get that work done? 

If you have family members who can help with renovations and upgrades, it could save you a lot of money in materials and labor. You’ll want to be sure your family members have experience with certain types of work, particularly plumbing and electrical, if those areas need attention. 

Start your journey now by completing Rate’s digital mortgage application. Loan Officers can help you explore mortgage options. 

With Rate’s Same Day Mortgage, you can be approved in one day. It could give you the competitive edge you need in today’s market! 

_{Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Restrictions may apply.} 

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