If my parents buy a house for me, is that considered a gift?

I’m in preforeclosure on my house. I’ve
lost my job. I owe more than house is
worth plus home needs many repairs. I
have 100k in a retirement acct. Can I
use that to buy a new home? Will my
current mortgage lender sue me for
letting current home foreclose?

Asked on May 2, 2016 under Real Estate Law, Indiana

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 4 years ago | Contributor

1) Yes, anything someone else gives you, or any payments they make for you, is a gift, including parental assistance with a house. You and/or your parents may have tax consequences from it, if it exceeds the amount they can give annually to you.
2) Yes, you can take the money out of most retirement accounts (e.g. 401ks) for this purpose, but will have to pay taxes on it and will also incur a 10% penalty when doing so, if you are not presently retirement age.
3) If you owe more than the house is worth, the lender has the right to sue you for any unpaid balance remaining after the home is sold in foreclosure. E.g. say you owe $250k, but the house brings in $180k, after expenses of sale: they can go after you for the other $70k.

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 4 years ago | Contributor

1) Yes, anything someone else gives you, or any payments they make for you, is a gift, including parental assistance with a house. You and/or your parents may have tax consequences from it, if it exceeds the amount they can give annually to you.
2) Yes, you can take the money out of most retirement accounts (e.g. 401ks) for this purpose, but will have to pay taxes on it and will also incur a 10% penalty when doing so, if you are not presently retirement age.
3) If you owe more than the house is worth, the lender has the right to sue you for any unpaid balance remaining after the home is sold in foreclosure. E.g. say you owe $250k, but the house brings in $180k, after expenses of sale: they can go after you for the other $70k.


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