what kind of limits are there on "gift" money? We are planning on applying for a mortgage loan in the next couple of weeks. Closing would be in May. The house is $117K. Our potential lender says that with our FHA loan, we need 3% down (~3500) and another 3% (~3500) for closing and fees. I have saved $4k, but the other $3k is in a mutual fund. If I cash out, what kind of penalty will I get?? Thanks
I did the same thing. I withdrew from my mutual fund to make up for the down payment. When I withdrew the money there was no penalty, but now that it is tax season I have to pay the income tax on my gains. Fortunately, it wasn't much. The IRS allows you to use your IRA for a first time home purchase by not penaltizing you for early withdrawl (10%). If this is your second or third home you will have to incur the 10% penalty plus capital gains tax. Let me know if you have any other questions. Dani PS The lender does characterize your mutual fund has a gift, but has an asset. You are allowed to deduct up to $10,000 per borrower or $20,000 total.
