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Cover story: Registries raise cash gifts, avoid etiquette no-no
Question of the Day
While champagne flutes, table linens and toasters are traditional wedding gifts, many of today’s brides and grooms already have established a home together and have more than enough household goods. Yet asking for cash gifts is seen by many as a longtime etiquette no-no.
An option for some couples is a nontraditional wedding registry that enables wedding guests to help them gather the cash they need for a down payment on a home. Nontraditional wedding registries also can be used for honeymoon expenses and for charitable donations. Some couples choose to set up more than one wedding registry, including one for traditional gifts and another for down-payment funds.
Dana Ostomel, founder of Deposit a Gift in New York City, has set up approximately 6,500 gift registries since she launched her company in 2009, about 600 of them for customers in the D.C. area. Mrs. Ostomel said about 15 percent of those registries are for down-payment funds and an additional 15 percent are for home-improvement funds to pay for items ranging from a new roof to new furniture.
“Given that 75 percent of today’s engaged couples already live together and are older, very often they are already established with the household basics that you find on a traditional registry,” Mrs. Ostomel said. “What they want is the gift of big-ticket items and longer-term goals, like the gift of homeownership.
“The best gift to get them [to those goals] is cash. The reality is that while it is taboo to ask for cash, it is ultimately the preferred gift. Deposit a Gift leverages the socially accepted platform of the traditional gift registry to allow people to register for what they can’t in a department store.”
In October 1996, a Federal Housing Administration initiative known as the Bridal Registry enabled couples to open an account with a lender in which friends and family could deposit gift funds toward a down payment. That initiative was phased out in 2000, but the FHA still allows gifts accumulated at a wedding to be used for a down payment. Lenders are required to document that the funds are gifts and provide a statement that the funds are not from a participating seller, builder or real estate agent who would benefit from the sales transaction when a home is purchased.
“An FHA loan requires a 3.5 percent down payment, and the entire payment can be made from gift funds,” said Gail Kullman, a senior loan officer with Prime Lending in Alexandria. “On a conventional loan, the borrower can use some gift money as part of the down payment, but 5 percent of the down payment must come from their personal funds rather than a gift.”
According to the 2010 National Association of Realtors Profile of Home Buyers and Sellers, 27 percent of first-time homebuyers used gift money from relatives and friends to make their down payment. Fifty-eight percent of homebuyers in 2010 were married couples.
Ms. Kullman said couples who choose to use cash from wedding guests as a down payment must make copies of the checks and verify that the funds are a gift.
“The best way to send funds is to wire them so that it is easier for a lender to see who the donor was,” Ms. Kullman said. “Lenders will also require a gift letter that shows that the donors do not have a financial interest in the purchase of a particular property. There are lots of ways to document that the gifts are from a wedding, such as setting up a separate account and verifying the wedding with a copy of the invitation or the certificate of marriage. A wedding registry would work well, too.”
Ms. Kullman also said that couples who wait a few months after the wedding before making a down payment on a property will not need to provide verification that the funds come from a gift.
“I would recommend talking with a lender before establishing a wedding registry to make sure you meet the requirements of that particular lender,” Ms. Kullman said. “In general, most lenders require two months of bank statements to verify your assets. If you have received the down-payment gifts and they are in your account for three months or longer, then the money is considered yours and won’t require documentation like a gift”
Mrs. Ostomel said that most down-payment registries she sets up generate between $5,000 and $10,000 in gift funds for a home purchase. A 3.5 percent down payment on a $300,000 home is $10,500.
Registrants can personalize their site with photos and lists of things they will need for their home, such as the front door, kitchen cabinets and a deck, so that gift-givers can feel they are choosing a particular item rather than just giving cash. The cash is then accumulated, and the bride and groom can make partial or full withdrawals for any purpose.
At 1-800-Registry, more than 1,700 wedding registries for down-payment funds have been established since the company launched in April, said Amy Fitzgerald, vice president of consumer marketing for 1-800-Registry in Las Vegas.
“Nontraditional registries are growing in popularity,” Ms. Fitzgerald said. “Brides and grooms can create a wedding blog on our site, upload photos and describe what they are looking for in a home or even post photos of a home they have already identified. The wedding guests and anyone else can donate funds directly to the site, and the money is held in an FDIC-insured account until they are ready to withdraw it.”
1-800-Registry is licensed to provide real estate services, including a 1 percent rebate for registrants who purchase a home with one of the company’s builder partners in California, Nevada or Texas. The company will be offering these services in the D.C. area in the future, but no specific date has been set.
Each wedding registry sets different rules for participation, so brides and grooms should be careful to read the fine print and know what fees are involved and how they will access the gift funds. In most cases, the gift funds are available immediately and can be used for other purposes than a home down payment.
A nontraditional registry can be created for commitment ceremonies, graduations, baby showers and more. It’s up to the recipients to decide how to use their gift money.
By Andrew P. Napolitano
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