As the age of newlyweds increases - in 1960 the average age of newlyweds was 23 years old; in 2009 it was 28 – fewer and fewer couples are coming to the matrimonial threshold without the housekeeping basics that once made bridal registries so useful. As couples take up the hand-held scanner at their favorite department store to begin their registry, they are choosing artwork over silverware, keepsakes over coffee pots.
In this day and age where many lending institutions require a 3.5% - 5% down payment from first-time homebuyers, and in some situations require down payments as much as 10% or 20% of the home’s purchase price, wouldn’t it be convenient if a bridal registry could be used to grow a down payment for a new home?
The Bridal Registry Account was created by the Federal Housing Administration (FHA) in 1996 to do just that. Friends and family of the engaged couple can make direct deposits into an account the couple can later use – but does not have to use – to make a down payment on their first marital home.
To establish an account, a couple simply has to visit a supervised institution and fill out the requisite paperwork. “Supervised institution” is a bureaucratic-sounding phrase indicating any FDIC-insured bank or NCUSIF-insured credit union, a status enjoyed by the vast majority of lending institutions nationwide. For a list of insured lending institutions, visit http://www2.fdic.gov/idasp/main_bankfind.asp (for banks) and http://www.ncua.gov/NCUAMapping/Pages/NCUAGOVMapping.aspx (for credit unions - be sure to check for the NCUA-insured logo on the page of any credit unions you choose to visit.)
Once the account has been established, friends and family can contribute gifts via direct deposit, checks and cash. The account does bear interest, though the specific rate depends on the institution and the economy.
With a median home sales price of $153,500 in the Roanoke and New River Valleys, seventy-five gifts of $75 each to a couple’s bridal registry would nearly cover many down payments in entirety.
Lenders have to document the receipt of all gifts to bridal registry accounts, and many find creative ways to make what may seem an impersonal gift more personal, such as giving the spouses-to-be a gift card providing the details of each gift made to the account.
Why is a special account needed to use bridal gifts for a down payment? Why not just deposit all monetary gifts into a regular savings account? Virtually all lenders require down-payment funds to be “sourced and seasoned.” In other words, couples have to prove where the funds came from and have to show a history of having had that amount of money at their disposal for a certain period of time. Gift funds are often exempt from the “seasoned” part of that rule, but gift recipients still have to provide documentation for the source of the gift. (You’d have to show a deposit slip and signed gift letter for the $20 Aunt Millicent dropped in your bride’s purse at the reception.) If the bridal gifts appear “excessive” to the lender evaluating the couple’s loan application, the loan officer may decide the gifts have to be seasoned after all.
Bridal registry accounts eliminate these possible complications. To use bridal registry account funds towards a down payment, a couple needs to provide only proof of receipt of the gifts noting the occasion, a copy of the bank statement showing all deposits to the account, and Bridal Registry Account certification from the account’s home bank. Furthermore, if the couple chooses to use the money elsewhere, they can. They are not locked into using it to purchase a new home.
As with all things money-related, each couple should diligently check the details of their account agreements for the conditions on such issues – don’t simply take our word for it, or the word of anyone except for the lending institution’s WRITTEN word.
With interest rates at historic lows, and the Great Recession driving home prices down, 2012 is a fantastic time to buy a home. A Bridal Registry Account can help newlyweds take advantage of the friendly housing market while meeting the more demanding down payment requirements born of the housing crisis.
