FHA + gifted down payment

[Anonymous]

Hello all:  Hoping to get some advice on fha gifted down payment. We are interested in purchasing a townhouse soon.  My sister's boyfriend of 11 years has offered the $7,000 downpayment to us and we would pay him back with the first time homebuyer credit we would be eligible for. First question: since she is not married to him, will this be allowed?  Now, second question:  If he signs a gift letter stating it does not have to be repaid would it that considered fraud?  Also, are there any tax implications for him?  Another unrelated question if you don't mind.  In regards to the loan application, I'm confused about what I enter for my income since over $7,000 comes out of my pre-tax salary yearly for health insurance.  I'm also considering starting a flexible spending plan for daycare/camp costs and I'm afraid of how much it will decrease my salary.  Appreciate any adivce you could give!!

[llecs]

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PGG65 wrote:

Also, are there any tax implications for him? 

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Can't speak on the other stuff, but there are no tax implications for a $7,000 gift. There is a 2009 limit of $13,000 with some income considerations on the receiver (won't apply here).

[Anonymous]

Thank you for your quick response!  THat is good news.

[Anonymous]

If you receive a gift for your down payment, you must verbally or in writing state that it was a gift and is not repayable.  If it is actually a loan and you have an agreement with him to pay him back, you are committing mortgage fraud.

Also, I believe (and this I am not sure about) that the gift has to be from a family member.

[SanDiegoEngineer]

Several problems here:

1)  Your sisters boyfriend is probably not allowed as family.  If there is no legal relationship tying your sister to her boyfriend, then legally, he is not family.

2)  It would be considered fraud, on both your part, and your sister's boyfriend's part, to have him sign a "gift letter" while you intend to repay him, and he expects repayment.  Whether it will be detected is another matter.

SD Engineer

[Anonymous]

That is what I was afraid.  Thanks for the info!

[valley_man0505]

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@Anonymous wrote:

If you receive a gift for your down payment, you must verbally or in writing state that it was a gift and is not repayable.  If it is actually a loan and you have an agreement with him to pay him back, you are committing mortgage fraud.

Also, I believe (and this I am not sure about) that the gift has to be from a family member.

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The gift does not have to come from a family member, but it is a lot easier if it does. FHA also allows for gift money from a "well documented close friend".  In other words, friends count, but you will have to provide some type of proof that you have a very close relationship--and friendship can be hard to prove.  I believe it was Dallas that mentioned in another thread that he had to go as far as submitting multiple pictures from various years that showed one of his clients along with the person gifting the funds to prove the relationship.

As for repaying the gift money, I would also have to agree that this would be mortgage fraud.  FHA cleary states that it can not even be implied that the money is to be paid back.