Selling stock for down payment - timing?

[Anonymous]

We are considering selling some of the stock I've earned through my job for our down payment. Any tips on timing (aside for the traditional tips re capital gains taxes)? E.g., would we have to do so a certain amount of time in advance in order to get pre-approved? TIA for any feedback!

[Anonymous]

We did this and our lender said we had to have the money in the bank before preapproval and for like 2 months so they would trace origins etc. it couldn't just apprear there the day before they looked at our paperwork.

[Anonymous]

I don't think so because you can show the stock ownership. Banks need to be able to trace the funding sources. In your case, you'll have brokerage statements that show you've owned the stock. Then you'll have the sell transaction and the ach transfer into your bank.

[Anonymous]

We just sold them and had them in our bank account for final approval. The underwriter required to see the money in our bank acount. They already knew it was coming from stocks.

[Anonymous]

I've heard underwriters consider stocks @ 65% of market value, so balance in cash is preferable if you're maxing your savings.

[Anonymous]

Anonymous wrote:I've heard underwriters consider stocks @ 65% of market value, so balance in cash is preferable if you're maxing your savings.

I thought this was because of tax (e.g. capital gains) from the sale. They don't want you to claim a certain amount of assets if a third is actually owed to the government.

[Anonymous]

What's the most tax-effective way to deal with a large cash gift for downpayment from immediate family? Any way to avoid documenting?

[Anonymous]

Anonymous wrote:

Anonymous wrote:I've heard underwriters consider stocks @ 65% of market value, so balance in cash is preferable if you're maxing your savings.

I thought this was because of tax (e.g. capital gains) from the sale. They don't want you to claim a certain amount of assets if a third is actually owed to the government.

401k yes, but regular stocks It doesn't matter. In fact when we cashed out our 401k the money was treated like cash despite us needing to pay taxes and penalties.

[Anonymous]

The 65% -is for reserve value of your 401k if you don't sell it

[Anonymous]

Anonymous wrote:What's the most tax-effective way to deal with a large cash gift for downpayment from immediate family? Any way to avoid documenting?

Won't you need a letter from your family stating that it is a gift and not a loan for your lender?

[Anonymous]

Anonymous wrote:What's the most tax-effective way to deal with a large cash gift for downpayment from immediate family? Any way to avoid documenting?

Just have them transfer it 3 months beforehand. Banks don't go back that far.

As far as IRS gift tax rules, you can get a certain amount from each parent to each you and your spouse yearly. I forget what it is this year, but it's a lot when you multiply it x4.

[Anonymous]

Anonymous wrote:

Anonymous wrote:What's the most tax-effective way to deal with a large cash gift for downpayment from immediate family? Any way to avoid documenting?

Won't you need a letter from your family stating that it is a gift and not a loan for your lender?

Also, you should feel lucky that you're getting significant family assistance and not try to cheat out of any taxes owed (which there probably would not be).

[Anonymous]

Taxes are not the issue -- your family can give you as much as they like (up to a limit that has to be reported, but still NO taxes are owed).

The issue is that banks want to know where your downpayment cash is coming from. The gift letter explains that.

The only reason PP would want to "avoid documenting" the gift is because she wants the bank to think they earn that much regularly so she can qualify for a higher mortgage than she can actually afford.

[Anonymous]

PP here, thought taxes were due on gifts of over 56k per year.

[Anonymous]

Anonymous wrote:PP here, thought taxes were due on gifts of over 56k per year.

They have to be reported to the IRS if over $14K per year per person (same gift giver). For example, mother gives $14K to daughter and son in law each no reporting required. If it's $15K each, then it must be reported.