We are in the proccess of trying to get a mortgage, we would like to
pay a certain percentage down to avoid a higher interest rate, we are
like $500 short.  We could use a gift but want also to avoid the
higher interest rate associated with that.  If $500 appeared in our
account, would that be enough to warrent verification, in other words,
would this constitute a gift?  Is there a way that it wouldnt be
considered a gift (on the legal end)?

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Clarification of Question by linkinpark-ga on 06 Apr 2004 10:18 PDT

Just to clarify since someone who posted a comment doesnt understand.
The $500 gift would go towards the downpayment, and yes, interest
rates tend to be higher on mortages with gifts as part of the
downpayment.

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Clarification of Question by linkinpark-ga on 06 Apr 2004 16:07 PDT

One more clarification, how much money would have to be deposited into
ones account/assets in order for a lender to want to have
documentation?

Your second sentence is paradoxical--there should be no interest on a
true gift.  And therein lies the definition: a gift is something given
with no expectation of its being repaid.  Thus, if the $500 has an
interest rate attached to it, i.e., it is actually in truth a loan,
that will not work for verification purposes because the available
funds that you need to qualify for a lower interest rate must truly be
"unencumbered," i.e., no one else has a claim to them.  So, if the
$500 is a real gift and no one expects to get that $500 back, you
should be OK.

The asker may wish to shop around more for a mortgage. There is
absolutely no rule that using a gift as part of your down payment will
increase your interest rate.  This may be what your lender does, but
it is not what all lenders do!

Thanks for clarifying, and I agree with research_help.  If you have to
pay a higher rate because part of the down payment if a gift, that
seems wrong to me.  If it truly is a gift and there's no expectation
of your having to pay it back, the lender suffers no increased risk
such as would justify a higher interest rate.

I have spoke to over 20 lenders, it may just be the program i am
trying to get. But basically it would benifit me to not have gift
funds.

What is the source of your gift?  A gift commonly refers to money
given to you by the seller, such as if you were buying an uncle's
house and he "gifted" you the money from his equity for the required
down payment. Lenders will charge a higher interest rate for a loan
like that as it is considered to be riskier. $500.00 is actually a
very small amount and less apt to be scrutinized depending on your
lender.

If I were you, instead of recieving a cash gift (from presumably a
relative), I would sell them the set of antique dishes hiding in your
cupboard. Should they decide to give you the dishes back as a
housewarming present, this would not have to be claimed as a "gift".

If this does not suit you, cash in the coins around your house or sell
something.  Just make sure money and items change hands where
applicable with a receipt given for verification. Your source for a
down payment does not have to specifically come from wages, but the
guidelines do not want the money to be borrowed such as from a credit
card, signature loan, etc.

You sound like a first time buyer, make sure you shop around for
interest rates. You are not bound to use the company your real estate
salesperson has directed you to. Also, mortgage "brokers" will charge
you points for securing the money from "lenders".  You save about 2%
going directly with a lender. Good luck!