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How Does The Gift Tax Work When Using Gift Funds To Buy A Home By Raleigh Mortgage Broker Kevin Martini 

January 11, 2023 by Kevin Martini

Are you thinking of using gift funds to purchase a new home? It can be a great way to make the dream of homeownership a reality, but most people don’t realize that it comes with its own set of rules and regulations. The gift tax is one such rule – have you heard of it? The Martini Mortgage Group is passionate about helping their clients understand how the process works so they can confidently begin their journey towards homeownership. This special article, will walk through everything you need to know about the gift tax when using gift funds to buy your first home in Raleigh or any city for that matter.

$17,000 Annual Exclusion

Every year, the federal government give each of us allowance to gift anybody $17,000 per year without incurring any gift tax in 2023 – this is up $1,000 from 2022! It is important to note, it is $17,000 per person per year not $17,000 in total.

The good news is that, if you are the one giving the gift, there is no time limit on when you can give it. You can give gifts any time during the year, up to a total of $17,000 for 2023. In other words, you could give $10,000 in February and another $7,000 in December and there would be no gift taxes due.

$12,920,000 Lifetime Exclusion 

What most people don’t realize, is that there’s a second allowance of $12,920,000 called the Lifetime Exclusion!

Let me illustrate by example: you want to help your child buy a home and you want to give them $117,000. Wait, that is $100,000 more than what you can give you out of $17,000 annual exclusion – no problem thanks to the Lifetime Exclusion.

With the Lifetime Exclusion and in 2023 the Lifetime Exclusion is $12,920,000 you can use any of it during your lifetime.  When you use it, it simply reduces your estate tax exclusion by that amount.

So in our illustration, if you gift you $117,000 to your child, you would take $17,000 out of your Annual Exclusion and $100,000 out of your Lifetime Exclusion. It is critical to highlight, your Annual Exclusion replenishes each year however your Lifetime Exclusion does NOT replenish).  With this illustration, assuming it is 2023 and you have never used your Lifetime Exclusion you will have maxed out your 2023 Annual Exclusion for your child and your Lifetime Exclusion would be reduced from $12,920,000 to $12,820,000.

Now, if your estate is less than $12,920,000, this would not be a problem at all, because your heirs would have no estate tax anyhow. However, if my estate is more than $12,920,000 then your  heirs would have to pay estate taxes on anything inherited above $12,920,000.

Yes, the Lifetime Exclusion is used for both gift and estate tax purposes. So every time it use it to not pay gift taxes, you’re reducing your estate tax exclusion. 

Need To Know By Certified Mortgage Advisor and Raleigh Mortgage Broker Kevin Martini

  • No Relationship Required: You don’t have to be related to use either the Annual or Lifetime Exclusion. You could  gift $17,000 a year to a complete stranger and you would have no gift tax. You can also gift money to a complete stranger using your Lifetime Exclusion, and you would have no gift tax.
  • No Tax to the Gift Recipient: Everything we just talked about applies to the person GIVING the gift. What about the person RECEIVING the gift? Well, here’s some more good news: there is no tax due by the gift recipient!
  • $25,840,000 Total Exclusion for Married Couples: One thing to keep in mind about the Lifetime Exclusion is that the amount changes each year. In 2023, the exclusion is $12,920,000, but it is scheduled to go up in the years ahead because it is indexed to inflation. Also, keep in mind that you can ‘port’ over your $12,920,000 to your spouse if I’m married. This would mean, a married couple could have a total joint exclusion of $25,840,000! Hence, if you are married and your net worth is less than $25,840,000, there is absolutely no reason whatsoever for you to concern yourself with the gift tax. That’s because even if you gift your entire net worth during your lifetime, you would pay $0 in gift taxes and your heirs would pay $0 in estate taxes. This is why the gift tax is really a non-issue for most people!
  • Additional Paperwork May be Required: If you’re using the $17,000 annual bucket, the gift doesn’t need to be reported to the Internal Revenue Service (IRS) if you follow the proper procedures. However, if you’re using the $12,920,000 Lifetime Exclusion, you would need to file a gift tax return with the IRS (even though no gift tax would be due). This is done to simply notify the IRS that you’re using part of your gift/estate tax exclusion.
  • Use Separate Checks: Make sure the checks are written by the specific individuals who are giving the gift. In other words, if mom is gifting you $17,000, and dad is also gifting you $17,000, you’ll need two separate checks: one from mom and one from dad. NOTE: during the mortgage process, you both may need to “source” these funds from a mortgage underwriting standpoint. Please consult with Martini Mortgage Group before you do anything so that we can discuss the specific details of your situation and make sure this is all done properly.
  • Eligible Gift Donors With Conventional Loans: “A gift can be provided by: a relative, defined as the borrower’s spouse, child or other dependent, or by any individual who is related to the borrower by blood, marriage, adoption or legal guardianship; or a non-relative that shares a familial relationship defined as a domestic partnership (or relative from a domestic partnership), individual engaged to marry the borrower, former relative or godparent.” Fannie Mae Seller Guide B3-4.3-04 Personal Gifts (12/14/2022)

Being informed and armed with knowledge is vital in making sure that you make the best decision for yourself and your family when it comes to homeownership. The Martini Mortgage Group stands ready to help navigate you through all aspects of this process giving you the confidence needed to purchase your dream home. We are here to carefully explain rules and regulations regarding using gift funds to secure secure the proper mortgage.

Don’t wait any longer – contact the Martini Mortgage Group today!

kevin martini best raleigh mortgage broker

Kevin Martini

NMLS 143962 | Certified Mortgage Adviso

Martini Mortgage Group at Gold Star Mortgage Financial Group, Corporation | NMLS # 3446 | 507 N Blount St, Raleigh, NC 27604 | (919) 238-4934 | www.MartiniMortgageGroup.com | Kevin@MartiniMortgageGroup.com | Equal Housing Lender

    PLEASE NOTE: THIS OVERVIEW IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL, TAX, OR FINANCIAL ADVICE. PLEASE CONSULT WITH A QUALIFIED TAX ADVISOR FOR SPECIFIC ADVICE PERTAINING TO YOUR SITUATION. FOR MORE INFORMATION ON ANY OF THESE ITEMS, PLEASE REFERENCE IRS PUBLICATION 559. ALSO, THIS ARTICLE REFERENCES THE FEDERAL GIFT TAX. YOUR STATE GIFT TAX LAWS MAY BE DIFFERENT.

    Filed Under: Annual Exclusion, Buy a Home, Fannie Mae, Gift Funds, Gift Tax Exclusion, Kevin Martini, Lifetime Exclusion , Mortgage, Raleigh, Real Estate Tagged With: Annual Exclusion, Gift, Gift tax Exclusion, Kevin Martini, Lifetime Exclusion, mortgage, using gift funds to purchase a new home

    Things to Know and Consider when Buying a Home (Martini Buyer Guide | Winter 2022)

    December 7, 2022 by Kevin Martini

    If you are a first-time homebuyer or a repeat homebuyer, there are many things one needs to know and consider when buying a home.  Certified Mortgage Advisor Kevin Martini and Senior Mortgage Strategist Logan Martini curated the Winter 2022 Martini Buyer Guide to simply explain the current real estate and mortgage markets plus vital information about buying a home and the process of getting a mortgage.  The Winter 2022 edition of the Martini Buyer Guide has many informative articles that talk about things one needs to know about the current real estate and mortgage markets. 

    winter 2022 martini buyer guide
    Winter 2022 Edition of Martini Buyer Guide

    If you are buying real estate, if you are selling real estate, if you are refinancing a mortgage or if you work in the real estate arena then the Winter 2022 Martini Buyer Guide would be very helpful since it simply explains the current real estate and mortgage opportunity.

    The Winter 2022 Martini Buyer Guide was curated to simply explain what is going on in the real estate and mortgage markets.

    Logan Martini, Raleigh Mortgage Broker & Senior Mortgage Strategist

    Contents of the Winter 2022 Martini Buyer Guide (things to know and consider when buying a home)

    best raleigh mortgage broker logan martini

    What is happening in the market?

    With everything going on in the housing market right now, you may have a number of questions about what that means for you and your plans to buy a home. Here are three things that are likely top of mind for you.

    • Why did Raleigh mortgage rates rise so much in 2022?
    • What is happening with home prices in Raleigh?
    • Should I buy a home in Raleigh today?
    raleigh mortgage lender martini mortgage group what is happening in the housing market page 1 of 2 winter 2022 martini buyer guide
    raleigh mortgage lender martini mortgage group what is happening in the housing market page 2 of 2 winter 2022 martini buyer guide

    Expert insights for today’s homebuyers

    If you want to buy a home today in Raleigh or anywhere for that matter, here are a few things experts say you should know about what to expect and why homeownership is so important.

    raleigh mortgage lender martini mortgage group expert insight for todays homebuyers winter 2022 martini buyer guide

    Trends that are good news for Raleigh homebuyers

    As the Raleigh real estate market has cooled but still remains strong, some of the intensity buyers faced during the peak frenzy of the pandemic has cooled too! Here are four trends that may be beneficial when you go to buy a home today.

    1. More homes to choose from
    2. Bidding wars have eased
    3. More negotiation power
    4. Higher loan limits
    raleigh mortgage lender martini mortgage group trends that are good news for raleigh homebuyers winter 2022 martini buyer guide 1 of 3 1
    raleigh mortgage lender martini mortgage group trends that are good news for raleigh homebuyers winter 2022 martini buyer guide 2 of 3 1
    raleigh mortgage lender martini mortgage group trends that are good news for raleigh homebuyers winter 2022 martini buyer guide 3 of 3

    2/1 Buydown

    Increasing Raleigh mortgage rates are presenting some challenges and opportunities not just for first-time homebuyers but also to repeat homebuyers too! Leap over the challenges and into the opportunity with a creative mortgage strategy offered by the Martini Mortgage Group called a Seller Paid Buydown.

    raleigh mortgage broker kevin martini steer paid buydown winter 2022 martini buyer guide
    FREE BUYDOWN CALCULATOR

    In most markets in North Carolina, especially in the Triangle, homebuyers will find that sellers are more willing to negotiate on price or other terms more than they have been in recent years.

    Logan Martini, Raleigh Mortgage Broker & Senior Mortgage Strategist

    5 traps to avoid when buying a home

    raleigh mortgage broker logan martini winter 2022 martini buyer guide 5 traps to avoid when buying home 1 of 3
    1. Home shopping before a solid mortgage approval.
    2. Not considering the costs of sale.
    3. Overlooking the costs of improvements, utilities and maintenance.
    4. Using the wrong down payment strategy.
    5. Shopping for a mortgage vs. shopping for the right mortgage professional.
    raleigh mortgage broker logan martini winter 2022 martini buyer guide 5 traps to avoid when buying home 2 of 3
    raleigh mortgage broker logan martini winter 2022 martini buyer guide 5 traps to avoid when buying home 3 of 3

    Top reasons to own your home!

    • Personal Expression
    • Accomplishment
    • Investment
    • Comfort
    • Family
    • Community
    • Privacy
    • Stability

    The non-financial benefits of homeownership

    While you could see less competition and more room for negotiation, you may be wondering if now’s the best time to buy a home given Raleigh mortgage rates are higher than they were last year. While the financial aspects are important to consider, there are also powerful non-financial reasons it may make sense to become a homeowner. See the full article on page 16 of the Winter 2022 edition of the Martini Buyer Guide.

    Things to avoid after applying for a mortgage!

    raleigh mortgage broker kevin martini winter 2022 martini buyer things to avoid after applying for a mortgage page 1 of 2
    raleigh mortgage broker kevin martini winter 2022 martini buyer things to avoid after applying for a mortgage page 2 of 2 png

    Why buying a home makes better sense than renting

    If there is a time to rent, that time is not now.

    Kevin Martini, Certified Mortgage Advisor and Raleigh Mortgage Broker

    The long-term benefit of homeownership

    Consider this: if you know people who bought a home 5, 10, or even 30 years ago, you’re probably going to have a hard time finding someone who regrets their decision. Why is that? The reason is tied to how you gain equity and wealth as home values grow with time.

    raleigh mortgage broker kevin martini winter 2022 martini buyer benefit of homeownership page1 of 2
    raleigh mortgage broker kevin martini winter 2022 martini buyer benefit of homeownership page 2 of 2
    Things to Know and Consider when Buying a Home (Martini Buyer Guide Winter 2022)Download

    Let’s chat…

    I’m sure you have questions and thoughts about securing the proper mortgage with the lowest cost of borrowing and real estate process.

    We’d love to talk with you about what you’ve read in the Winter 2022 Edition of the Martini Buyer Guide and help you on the path to buying your new home. Our number is (919) 238-4934 and we look forward to working with you.

    logan martini raleigh mortgage lender with martini mortgage group 2

    Logan Martini

    Senior Mortgage Strategist | NMLS 1591485

    Logan@MartiniMortgageGroup.com

      kevin martini best raleigh mortgage broker

      Kevin Martini

      Certified Mortgage Advisor | NMLS 143962

      Kevin@MartiniMortgageGroup.com

        Filed Under: 2-1 Buydown, Affordability, Agency Loan, Appreciation, Buy a Home, buydown, Buydowns, Conforming Loan, Conforming Loan Limits, Conventional Loan, Fannie Mae, Freddie Mac, Home Loan Rates, Home Loans, Home Values, Housing Market, Inflation, Kevin Martini, Loan Limits, Logan Martini, Martini Buyer Guide, Mortgage, Mortgage Rates, Raleigh, Real Estate, Things to Consider when Buying a Home Tagged With: Buying a Home in North Carolina, Kevin Martini, Logan Martini, Martini Buyer Guide, Martini Mortgage Group, MartiniBuyerGuide.com, North Carolina, Raleigh, Raleigh Mortgage, Raleigh Mortgage Broker, Raleigh Mortgage Lender, Raleigh Real Estate, Real Estate, Real Estate Tips, Things to know and consider when buying a home

        2023 Raleigh Conforming Loan Limits 

        November 30, 2022 by Kevin Martini

        The 2023 conforming loan limits for the Raleigh, North Carolina and the Triangle of North Carolina by the Federal Housing Finance Agency (FHFA) have been established. 2023 will bring a $79,000 increase in conforming loan limits for a one-unit property in Raleigh, North Carolina and surrounding areas.  The new 2023 conforming loan limit is $726,200.

        Higher conforming loan limits benefit both a homebuyers and homeowners too! For a homebuyers, it opens more price points with lower down payments  For homeowners, they can access more equity.

        kevin martini best raleigh mortgage broker

        Kevin Martini

        Raleigh Mortgage Broker & Certified Mortgage Advisor

        Benefits from the 2023 Loan Limit Increase

        BUY A HOME

        It may make sense for you to consider a new home purchase using the higher loan amounts. This may be the perfect time for you to lock in your interest rate before interest rates move higher.

        REFINANCE

        It may be worth it to consider a home loan refinance if:

        • You currently have a home loan that is near the loan limit
        • You’d like to make some home improvements
        • You’d like to consolidate other debts into your home loan (such as home equity loans or credit cards)
        • You’re paying mortgage insurance and your home has increased in value from the time when you purchased the home
        • You anticipate a change in your cash flow situation in the coming months (college funding, retirement, elder care, etc.)

        Raleigh, NC 2023 Conforming Loan Limits 

        One-Unit

        Two-Unit

        Three-Unit

        Four-Unit

        $726,200

        $929,850

        $1,123,900

        $1,396,800

        All cities and towns in Wake County to include Raleigh and Apex, Garner, Fuquay-Varina, Holly Springs, Knightdale, Morrisville, Roseville, Wendell, Zebulon.

        History of Conforming Loan Limits in Raleigh

        conforming loan limits in raleigh kevin martini 507 n blount st raleigh nc 27604 martini mortgage group raleigh mortgage broker

        What are conforming loan limits?

        Fannie Mae (a.k.a. Federal National Mortgage Association or FNMA) and Freddie Mac (a.k.a. Federal Home Loan Mortgage Corporation or FMCC) were created by Congress to provide liquidity, stability and affordability to the mortgage markets.  Both Fannie Mae and Freddie Mac are government-sponsored entities not lenders instead, they offer access to funds and guarantees.

        Loans guaranteed by Fannie Mae or Fredie Mac are commonly referred to as conforming loans since they conform to the Fannie Mae and Freddie Mac guidelines. Conforming loans are also referred to as agency or conventional loans.

        Housing and Economic Recovery Act (HERA)

        In response to events of 2008, HERA was a piece of legislation that requires a baseline conforming loan limit to be adjusted annually to properly reflect the changes in average home prices using data from the last four quarters from the FHFA House Price Index (a.k.a.FHFA HPI).

        According to the most recent FHFA HPI, home price rose on average 12.4% from the third quarter of 2021 to the third quarter of 2022. In North Carolina, home prices rose 17.4%. The Raleigh – Cary metro area had a 16.7% year-over-year change and is ranked #18 of 100 top metros.

        Be ready to make you move

        Let’s connect so you can understand how higher conforming loan limits can help you and your family.

        Filed Under: Agency Loan, Conforming Loan, Conforming Loan Limits, Conventional Loan, Fannie Mae, FHFA, Freddie Mac, Kevin Martini, Loan Limits, Logan Martini Tagged With: 2023 Conforming Loan Limits, 2023 Fannie Mae Loan Limits, 2023 Freddie Mac Loan Limits, Kevin Martini, Logan Martini, North Carolina, Raleigh, Raleigh Mortgage Broker, Raleigh Mortgage Lender

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        Martini Mortgage Group at Gold Star Mortgage Financial Group, Corporation | NMLS # 3446 | For licensing information go to: www.nmlsConsumerAccess.org and/or www.GoldStarFinancial.com Please review our Disclosures & Licensing information | Gold Star Mortgage Financial Group Corporation has no affiliation with the US Department of Housing and Urban Development, the US Department of Veterans Affairs, the US Department of Agriculture or any other government agency. Equal Housing Lender. For further information about Gold Star Mortgage Financial Group, Corporation, please visit our website at www.GoldStarFinancial.com. Receipt of application does not represent an approval for financing or interest rate guarantee. Applicant subject to credit, acceptable appraisal, title, and underwriting approval. Not all applicants will be approved. Other terms and conditions apply. Contact Gold Star Mortgage Financial Group, Corporation for more information and up-to-date rates.

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