By financen | March 2, 2011 - 3:02 pm - Posted in Mortgage

When buying a house for the first time the home buyers make a token amount of money as a mortgage down payments or down payments gifts.

Down payment gifts are heavily regulated. Since many first time home buyers are lacking funds, this makes down payment assistance programs useful. Without programs such as this, many first time home buyers would find it impossible to make that first purchase.

Lenders like to see the buyer have a state in the purchase. So in this brief article I want to help you understand how they work. Try to put yourself in the shoes of the lender. When using down payment assistance or down payment gifts the lender assumes 100% of the risk.

That is why the only proper way for this type of help to work is it has to be a gift. Now you may be wondering, how can I get a gift like this? If this type of mortgage down payment assistance was not regulated, there could become a lot of loan sharks out there.

All FHA loans allow for down payments assistance for the first time home buyers. The gift for down payment can come from anywhere it can be from any relative or friends or even from a charity. However the gift you would be using as down payment has to be documented to prove that this is a gift not a loan. This is just an assurance to the lenders that even you have a small amount of interest in the property. That interest of course is equal to the gift which was used as the down payment.

Now, what if you don’t get any help from your family members or friends for the down payment assistance, we can use a charity. However, it is not exactly the same as if you had gotten a gift from a family member.

There are charities out there that will use the seller’s proceeds as the down payment assistance for you. So then, if we do not have a family member that can help and if we have a problem finding the charity, we can ask the seller to offer the down payment assistance.

Now you must be wondering how does it work? The seller makes a donation to the charity and then the charity makes the down payment for you. Now you may wonder, how can this actually be? Do you mean that the seller is going to make my down payment? No, that is not actually what takes place. The seller makes a charitable donation and the charity makes a gift to the lender equal to the amount of your down payment.

I do not know any other way to explain this other than it is what I call a legal way to launder money! As the buyer of a home, you know you need to make a down payment, so this type of mortgage down payment assistance program is available to you.