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Ely
Ely, Counselor at Law
Category: Family Law
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My daughter and her fiance are purchasing a home. She is a

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My daughter and her fiance are purchasing a home. She is a graduate student and he is employed full time. As he is employed full time, he is applying for the mortgage. My daughter is providing the downpayment from her savings. The bank is saying that my daughter's contribution is a gift and is requesting that she sign a gift letter relinqueshing all claims to the funds. As her contribution is not a gift how do they resolve this issue?
Thank you.
Submitted: 1 year ago.
Category: Family Law
Expert:  Ely replied 1 year ago.
Hello friend. My name is XXXXX XXXXX welcome to JustAnswer. Please note: (1) this is general information only, not legal advice, and, (2) there may be a slight delay between your follow ups and my replies.

Can you please tell me:

1) Is her name on the mortgage paperwork at all, or not; and

2) When you state "her contribution is not a gift," what do you mean, please? Is she expecting her fiance to pay her back, or, is there a pre-nuptial agreement of some kind in place?

This is not an answer, but an Information Request. I need this information to answer your question. Please reply, so I can answer your question. Thank you in advance.
Customer: replied 1 year ago.


Here name is XXXXX XXXXX the mortgage paperwork but she expects that it will be on the deed.


 


Her contribution is not a gift--it is her contribution to purchasing the property

Expert:  Ely replied 1 year ago.
Thank you.

Allow me to explain how this works and why they are asking for this.

Also, a mortgage situation can have a party in two positions:

1) As a deed-holder (one who holds the deed but has no duty to pay); and
2) As a mortgagee (one who holds no interest in the deed but has the contractual obligation to pay the mortgage).

Often, the party holds both positions, but, this is not true 100% of the time. For example, a rich uncle wants to spoil his niece and purchases her a home, but, he keeps himself as a the mortgagee but she receives the deed. OR, as in her case, a spouse who is qualifying for the mortgage as a mortgagee because only he can, but, she will also be a deed-holder.

SO WHY IS THE LENDER DOING THIS?

Two reasons.

MINIMIZING LITIGATION
Now, because they are fianced, they are expected to get married. But, they may not. If not, then she can always go to Court and claim that part of the home belongs to her in equity. The home can become the subject of extensive litigation between them.

The lender has an interest in the property - they do not want it to be the subject of litigation by any means. Ergo, they WANT her to sign a document stating this was a gift because by doing so, if they never marry but she fights for the home, that document will state that it was a gift, and as such, she has no interest to the property, thus reducing the chances of ongoing litigation.

Now of course if they get married, he will put her name on the deed and then she will automatically have this viewed as community property if they divorce.

But, the lender is simply trying to minimize litigation for a property in which they will have an interest, and is attempting to do so if they never marry. Of course, she does not have to sign the document, but then, the lender can deny the loan.

PAPER TRAIL FOR FINANCES
The underwriter has to have all his income recorded to ensure that if they are audited, no red flags appear. Ergo, if he is receiving a hefty downpayment on the home, then that money needs to be recorded. As such, a gift letter is standard. See here.

I am afraid that here, she really has little choice - she can either sign, or not sign, but the lender can make this request.

I hope this helps and clarifies.

Please note: I aim to give you genuine information and not necessarily to tell you only what you wish to hear. Please, rate me on the quality of my information and do not punish me for my honesty. I understand that hearing things less than optimal is not easy, and I empathize.

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Ely, Counselor at Law
Category: Family Law
Satisfied Customers: 86628
Experience: Private practice with focus on family, criminal, PI, consumer protection, and business consultation.
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