Question:
Spouses are purchasing a home. The mother is a stay at home mom, as a result she can’t be on the mortgage. The couple took money out of their joint account to make the down payment. A couple days before the closing, the bank required a gift letter from the wife to the husband in order to approve the down payment. Why would the bank require this type of letter?
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Answer:
As an experienced Marriage Attorney, I have found that often in qualifying for a mortgage, banks will require information regarding the source of funds for purchase. If, however, you have already closed on the home and the mortgage, you should be done—and the bank should not be able to require anything further of you (beyond payment of your monthly mortgage bill). I don’t see why you should have to sign that letter, and cannot advise you to sign any statement that is not truthful.
With regard to the “character” of your home purchase, irrespective of the fact that the home has been purchased in your husband’s name, it is and will still be considered “marital property” in the event that you and your husband divorce in the future. Marital property means that it is subject to equitable distribution in the event you divorce. Were your husband to try to claim any part of that house as separate property in the event of a future divorce, he would bear the burden of tracing the funds back to his separate property (which is something that he would not be able to do on the fact pattern that you have outlined).
Further, during a marriage, gifts between spouses are also considered “marital property.” This means that the mere fact that you say that the down payment funds were a “gift” from you to time should not affect the character of the purchase. This, however, would be different if the “gift” were from a third party to your husband alone (and not to the two of you together). In the event of a third party gift, it would be possible for your husband to try and trace back to this gift to establish a separate property interest in the house.
Generally speaking, in a divorce, the court will consider the value of the marital property, the amount of equity in the property, and the type of appreciation. If, over several years of marriage, your husband continues to own that home, and $100k in equity builds in that home, that equity is presumed to be marital property. Even if he can successfully trace back $20k to a separate property gift, there would still be $80k in equity subject to equitable distribution in the context of a divorce action.
Do you have questions about buying a home with your spouse? If so, contact the experienced Saratoga Marriage Attorney Jennifer Sunderlin Morton.
This legal question was provided by Avvo and answered by Jennifer Sunderlin Morton, an experienced Saratoga Marriage Attorney. This does not consent an attorney client relationship.
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