Will a Monetary Gift
Spoil Your Loan?

Question: My parents have a substantial gift they have been saving as a down payment toward my first house. I have read that some loan agencies do not allow gifts as a resource, while others allow gifts but only when accompanied by a letter stating the money is a gift and not a loan. Will some agencies require a notarized letter? What kinds of loan agencies allow gifts as a financial resource? Should I put the money in my own account before I go for preapproval?

LaVerne: As short a time as three years ago, gifts were a problem. They are much less so today. Most lenders will treat them just like the cash in your pocket that they are. However, to be safe you may want to have the gift transferred to your account prior to applying for preapproval. That way the money is yours with no strings attached. If the money remains with your parents, you may need a notarized letter stating that it is a gift and that there is no repayment required.

One caution, however: Gifts of $10,000 and under per person are normally tax free. Gifts over that amount can have tax consequences. Check with your accountant before having the money transferred to see what is best way of handling it for you.

Mr. Irwin has more than 25 years' experience as a Los Angeles-area real-estate broker. He is the author of more than two dozen books about real estate and is recognized as one of the most knowledgeable writers in the real-estate field. Mr. Irwin's most recent book is "Tips and Traps When Building Your Own Home," (McGraw-Hill, 2000).

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LaVerne, Muncie, Ind.

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