Colorado Conventional 5% Down - Gift Funds?
I live in Colorado. I earn $98k per year and have $1100 per month in total debt payments (huge student loan payments plus some credit cards). My score hovers around 690-700, and I'm not sure I can get it past the 720 mark because of some old lates that are 4-5 years old but still on my report. I am hoping to buy a house for around $300k, but need about 6 months to get some things in order. Is it likely that I can go conventional with 5% down? If so, can any of the 5% and/or closing costs be a gift and, if so, how much (assuming LTV will be 95%, and not less than 80%)? I realize I could go FHA, but I very much want to avoid the lifetime PMI.I've encountered conflicting information on the web - some say that your first 5% must be borrower contribution if LTV is high, some say only 2-3% of the 5% down is required, and some that PMI guarantors are changing their rules about allowing 100% gift money for conventional loans above 80% LTV, but haven't been able to find good information on whether lenders are really getting on board with this. I've also heard that Fannie Mae guidelines would require a credit score about 720 if using gift funds, but again not sure if this applies if I come to the table with, say, 2% and my parents gift the other 3% . . . Any clarification would be very much appreciated! By the way, I'm a first time home buyer and this would be a primary residence. I believe I earn too much to qualify for any of the zero down payment programs, such as CHA. by sarahanncolorado152 from Denver, Colorado. Jun 4th 2014
Chris Gummerson (cgummerson11)
#397 ranked lender in California - 648 contributions
Unless your gift funds are 20% then you would be required to put 5% of your own funds down. FHA can be all gift. For the math, take what you earn monthly gross, and multiple that by 45% that give you $3,675. That is the maximum all of your debt payments can be. (Some lenders can go to 50% with reserves.) Back out your debt payment of $1,100 and you have $2,575 left over for mortgage, tax, insurance, and mortgage insurance or any HOA dues if applicable. If you can get 10% down, then you can do a 80/10/10 piggyback loan with 10% down and no mortgage insurance.
Dave Metsker (DaveMetsker)
#35 ranked lender in Oregon - 2,318 contributions
You may be able to find a property to lease with option to purchase, to allow you to get your down payment saved up.
David Capra (dave@redrockhomeloans.com)
#24 ranked lender in Utah - 13 contributions
We have a program where gift funds can be used for the 5% down, so the entire down payment can be gifted. The other option is to simply get the gift funds from your parents now, and let them season for a couple months, then you will have the down payment funds in your account. Your debt-to-income ratio's appear to fine with your current income. This looks like a very doable deal, and looks well within guidelines all the way through. Would be happy to help you on this one! Thanks-Dave
James Barath (JamesBarath)
#9 ranked lender in Indiana - 352 contributions
So long as you intend to purchase a home as your primary residence, the entire minimum down payment can be gifted. You may want to discuss with the parents an even larger gift to ensure you debt-to-income qualify. Let them know that you would forego future inheritance for a gift of funds for a down payment today. Good luck!
Sean Young (SeanYoung)
#1 ranked lender in Colorado - 1,112 contributions
Hi Sarah, the entire 5% can come from your parents as a gift and there is no score requirement to do so. As long as you receive an Approve/Eligible from DU you will have no issues. Your debt to income ratio is right on the border so you will want to play close attention to the property taxes, insurance and possible HOA's when shopping for a property....I'm local and my office is in DTC if you would like to get pre-approved or if you just have some additional questions. My phone is 303-521-7169 and email is loanofficerseanyoung@gmail.com .....Best wishes, Sean
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