Real Estate: Big Wedding Or House Down Payment?

Wedding Gift Versus Down PaymentQuestion: We’re getting married and rather than registering for gifts we would prefer cash to help save for a down payment. Some of our relatives think this is nontraditional and maybe unwise. What do you think?

Answer: Stick to your guns.

According to one study the typical wedding now costs almost $30,000 by the time you’re done with rings, cakes, venues and videographers. That’s a huge amount for most families given that the average household income in 2013 was $51,939. That’s also a huge amount for another reason: Household income in 2013 was 8.7 percent lower than in 1999.

Is some of that wedding money better spent on a down payment for a house? The answer depends on family preferences, finances and dynamics, whatever is best in your particular situation. It also depends on family goals: Many families see weddings as a way to help the new couple get a head start in life. The important point is not to let social pressures drive anyone into debt or financial discomfort, including the bride, the groom, the parents or the guests.

Big Wedding Or House Down Payment?

Mortgage lenders like financial gifts. With FHA loans, as one example, the borrower is responsible for coming up with the down payment. There can be a “seller contribution,” say a credit toward closing from the owner, but the down payment itself must come from the purchasers. However, one big exception to the down payment rule is that gifts are allowed from family, friends, an employer or labor union, a charitable organization and even a government agency.

“In order for funds to be considered a gift,” says HUD, “there must be no expected or┬áimplied repayment of the funds to the donor by the borrower.”

The value of such gift funds is enormously important. First, the larger the down payment the less there is to borrow, so monthly ownership costs are lower. Second, if the down payment is at least 20 percent of the purchase price then the borrowers won’t need mortgage insurance, a big cost. In effect, not having to pay mortgage insurance is a sizable dividend.

What about registering for gifts?

The reality is that many of us are getting married later. Back in 1960 the typical bride was age 20.3 at the time of her wedding, but now the bride is likely to be age 26.6 according to the Census Bureau. Because people are marrying later they tend to own more stuff at the time of their nuptials so they have less need for serving spoons, mixers and bathroom scales. Instead, in many cases, checks and cash are very welcome.

The socially acceptable way to get financial gifts is to let the word spread that you would prefer cash and explain why: Money from a wedding that’s intended for a responsible purpose — perhaps toward the down payment for a home, the repayment of student debt or just for savings — is likely to be a very acceptable idea, especially in today’s fragile economy.

As to how much to give, that’s entirely up to individual guests. There should be no expectations for anyone. Every household has a number which is comfortable for them and no matter how large or small the gift, each guest is entitled to a warm, genuine and gracious thank-you note.


Syndicated originally to newspapers nationwide by Content That Works. Revised, modified, expanded and updated. Posted with permission.

Technorati Tags: , , , , , ,

Posted in: News

1 Comment on "Real Estate: Big Wedding Or House Down Payment?"

Trackback | Comments RSS Feed

  1. Dwayne says:

    I really like you point about not letting social pressures drive you into debt or financial discomfort. You can still enjoy a more “modest” wedding and maybe a few less gifts and then use the money for something that will benefit you for your lifetime.

    It doesn’t hurt to still register for gifts though, some may find it very uncomfortable or impersonal to give money. Give them the option but let them know if you prefer money and then let them know why. Someone might even be more inclined to give a larger amount knowing that it is going to a practical use.

Post a Comment