Can family gift us money after we get a loan to buy a house from them? 13 Answers as of April 28, 2014

We are in the process of getting an FHA loan to purchase a house owned outright by my uncle, aunt, and father that they inherited when my grandfather passed away. We want to get the loan for 99,000. Then after closing, we want the family to gift us 10,000 so we can make renovations to the house. But my uncle is concerned that this is illegal, and wants to just sell us the house for 89,000 (which would give us a slightly lower payment, but would not help us make the renovations). The 10,000 gift won't have anything to do with the closing agreement, and it is just trust on my part that they will each give us $3,333 after closing and receiving their monies. Am I correct in thinking that what my family does with their money after closing is their business and they are free to gift money to whom ever they wish?

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Law Ofices of Edwin K. Niles | Edwin K. Niles
You are correct.
Answer Applies to: California
Replied: 4/28/2014
Ashcraft & Ashcraft, Ltd.
Ashcraft & Ashcraft, Ltd. | Randall C. Romei
There is no problem with accepting a gift. The problem surfaces if the there is an expectation that the funds will be repaid. There can be no secret debt arrangement. Such a promise or arrangement must be disclosed to the lender and would probably jeopardize the loan. There can be no second mortgage promised now and delivered later. The other factor is the possible characterization of the gifts as a de facto reduction in the purchase price. The promise of the gifts must not be connected to the sale and should not occur, if at all, near to the closing date. Each gift should be independent of the others, come directly from the an account of the donor and the gifts should not occur at the same time.. It would also be best if the ratio of the gifts is different than the ownership interests of the Sellers. If your father, aunt and uncle are equal owners, perhaps your father gives more than your aunt and uncle. You might also consider that a gift being made by the direct purchase of material or labor.
Answer Applies to: Illinois
Replied: 4/28/2014
Goldsmith & Guymon
Goldsmith & Guymon | Dara Goldsmith
A gift is a gift, there is nothing illegal about being given a gift.
Answer Applies to: Nevada
Replied: 4/28/2014
Law Office Of Victor Waid
Law Office Of Victor Waid | Victor Waid
You are correct in your thinking, as the lender would not care if a gift is made to you and what you did with money.
Answer Applies to: California
Replied: 4/28/2014
Gates' Law, PLLC | Thomas E. Gates
One may gift $14,000 to a single individual each year without tax considerations. Hence, for a husband and wife, $28,000 can be gifted each year. They must file the appropriate form with their income tax return.
Answer Applies to: Washington
Replied: 4/28/2014
    Frederick & Frederick PLC | James P Frederick
    Yes, this can be done, provided the house appraises for the higher value and you can come up with the necessary down-payment.
    Answer Applies to: Michigan
    Replied: 4/28/2014
    Peters Law, PLLC
    Peters Law, PLLC | Mark T. Peters, Sr.
    Yes, I think you are right; however, you are being awfully greedy. They are selling you a house, probably below cost and now you want them to give you money. That takes a lot of chutzpah.
    Answer Applies to: Idaho
    Replied: 4/28/2014
    Law Office of Pamela Braynon | Pamela Y. Braynon
    You are right in your thinking about them being able to do with their money as they like. As long as you don't receive a gift over $13,000 per year you won't incur the gift tax. But this wouldn't apply to you, because each person would gift you $3,333.
    Answer Applies to: Florida
    Replied: 4/28/2014
    Ronald K. Nims LLC | Ronald K. Nims
    If the house is worth $89,000 and they are setting the price artificially high to give you cash, your uncle is right - that's illegal.
    Answer Applies to: Ohio
    Replied: 4/28/2014
    Charles M. Schiff, Attorney at Law
    Charles M. Schiff, Attorney at Law | Charles M. Schiff
    You are right. The money can be gifted in the manner you describe. Your uncle may be concerned that the purchase price presented to the FHA may appear to be a sham if there is a side agreement to refund part of the purchase price. The intent needs to be made clear to avoid this appearance.
    Answer Applies to: Minnesota
    Replied: 4/28/2014
    Sebby Law Office
    Sebby Law Office | Jayne Sebby
    I don't know why your uncle thinks that gifting you the money would be illegal but he's clearly uncomfortable with the idea. Look for other ways to make this work for all of you. If you haven't already committed to the FHA loan, see if you can get an extra $10,000. Then buy the house for $89,000 and use the extra money for renovations. If that isn't possible, try to buy the house for $89,000, and borrow the $10,000 from your father, aunt, and uncle to make the renovations. Or, if the house is in an area that the community wants to revitalize, see if you can get a low-interest loan from some community agency or city department.
    Answer Applies to: Nebraska
    Replied: 4/28/2014
    James Law Group
    James Law Group | Christine James
    Yes, they are free to gift you the money if they chose to do so. If the house appraises, they can sell you the house for $89,000, and you may be able to get a loan for $99,000 and get cash back from the loan. Speak with your loan agent to find out if this is a possibility should your family not want to follow through.
    Answer Applies to: California
    Replied: 4/28/2014
    Attorney At Law | James G. Maguire
    You are correct. Nothing illegal about it. Your relatives are free to make whatever gifts they want. No tax consequences.
    Answer Applies to: Louisiana
    Replied: 4/28/2014
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