WORD: Gift

And the WORD for Today is:

Gift—in real estate, typically means an amount of money provided to a buyer to help them cover their down payment and/or closing costs. A gift is supposed to be a gift—an amount of money, which the buyer is not expected to pay back.  For many years the gift almost always was provided by a family member but might also be provided by a non-profit such as a community development corporation (CDC), occasionally a church or sometimes a state agency committed to helping consumers to attain home ownership.

In modern times, since 1994 with the creation of the Nehemiah Corporation, a new kind of gift program became a part of the real estate industry. Unfortunately, with the gifts provided from this agency and many similar agencies, which are set as non-profits by IRS guidelines, the funds provided to the consumer ARE NOT IN FACT GIFTS but have been added to the consumer’s loan so that in fact they are borrowing the down payment. This is almost always true when the consumer is building and using this “gift”; less frequently used when they buy an existing house. 

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You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

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