Little-known HUD program allows couples, graduates and expectant parents to amass cash gifts from friends and family into a down payment on an FHA mortgage.
When I told my father I was getting married, he wrote me a check and said: “If you use this on a wedding, it’ll be the last check I ever write you.” And with that, I drew up a guest list of about seven people and used the money for the down payment on my first home. This, at a time when my friends were routinely dropping six figures on weddings with 200 or 300 attendees.
Apparently, the federal government has long, if quietly, tried to help newlyweds-to-be take a similar course, facilitating the application of their families’ wedding gifts toward their down payments via the FHA Bridal Registry Program. With home prices as low as they are today and down payment assistance programs scarce, it would seem that many a newlywed would rather have 100 $100 gifts (which would make the FHA required 3.5 percent down payment on a $275,000 home) than have 100 items like blenders, dust ruffles and knife sets they’ll have to put in storage until they can scrape up the cash to move out of their apartment.
The FHA Bridal Registry works like a traditional registry but is even more flexible. The bride and groom visit their choice of FHA mortgage lender and set up what is essentially a custodial savings account for the dedicated purpose of funding their down payment. Then they provide the details to friends and family. In turn, the couple’s benefactors can deposit funds directly into the account, or can simply hand cash or checks to the couple for deposit into the account.
These arrangements offer additional flexibility beyond the traditional down payment gift rules applicable to FHA loans, which require that gift funds (vs. money the couple saved up from their own income) be “sourced,” meaning borrowers must document their family relationship between themselves, show where the giver got the funds from and produce a letter from the giver stating that the funds are a gift and not a loan. It simply wouldn’t make sense for borrowers to jump through these traditional gift funds hoops for 50 or 100 different small, cash gifts. With the FHA Bridal Registry Program, they don’t have to provide anything more than “lender and borrower certification of the funds.”
From a reading of a 1997 Department of Housing and Urban Development bulletin clarifying the contours of the then-newly launched program, it seems that the FHA Bridal Registry might have been intended more as a marketing tool for FHA lenders than a tool for buyer and borrowers. However, the program’s utility for consumers is its flexibility, which does create expanded possibilities for all sorts of buyers trying to break into this bargain-priced buyers market without having to wait the months or years it can take to save up a down payment.
In 2001, 68 percent of home buyers were married couples; last year, that number had dropped to 58 percent, according to the annual National Association of Realtors Profile of Home Buyers and Sellers. Accordingly, in one example of the program’s flexibility, HUD allows the program to be used before the wedding, by as-yet-unmarried couples. In fact, the program can even be used outside of a wedding gift context, on what HUD’s letter of explanation described as “other legitimate occasions where substantial gifts are typically received by an individual or individuals that may in turn be applied toward the purchase of a home.” So those planning unions in states where same-sex marriage is not yet legal, college graduates and parents expecting a baby should all explore the possibility of using the FHA Bridal Registry to parlay their well-wishers’ gifts into a down payment on a home.