What are the rules for using gift funds for a down payment?

A Purchase Money Second (PM2) Home Loan* is a second mortgage that closes with a corresponding first mortgage from the same lender. The first mortgage covers 80% of the home value and the second mortgage (a fixed home equity loan) covers 10% – meaning you have a down payment of only 10%. A PM2 has advantages for a buyer that doesn’t have or doesn’t want to put 20% down. This type of loan allows you to avoid paying for monthly private mortgage insurance (PMI). Plus, the home equity loan does not have a pre-payment penalty so you can pay it off at an accelerated pace if desired. Lenders may restrict PM2 loans to owner-occupied properties and these are minimum credit score requirements.

Contact me and we can do a comparative analysis to see if the PM2 is the right loan for you.

Terri Marks


Mortgage Advisor



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