Using Gift Funds for Your Mortgage

Many borrowers struggle with the down payment for their mortgage, it’s one of the reasons people wait so long to buy a house.  With the market conditions so favorable towards home buyer it would be a good idea for buyers to know their options so they can start building equity faster.  Here is a detailed outline of gift funds and how they can be used for your mortgage:

Gift funds must come from an established relationship

Mortgage guidelines are very clear that the source of your gift funds have to be family or someone you have a long term close relationship with (Fiance’, boyfriend / girlfriend / in-laws).  They cannot be from a friend.

The rules vary depending on the loan you are using:

Gift funds are acceptable on every loan we do but the rules for receiving them are different.  So it’s important to know what type of loan you are using before you accept the gift funds, this will ensure an easier transaction down the road.  Here are the guidelines:

FHA/ VA / USDA gift funds require the following:
  • Deposit the gift money into your verified bank account
  • A transaction history from that bank account showing the money being deposited
  • A gift letter filled out by the borrower and donor
  • A bank statement from the donor showing the money came from their account
  • A front / back copy of the check (if the donation was in check form)
Conventional gift funds require the following:
  • Bank statement showing the donation into the borrower verified account
  • Front and back copy of the check (if donation was given in check form)
  • Gift letter signed by borrower and donor.

 

Preparation

It’s important to let your loan officer know ahead of time you are receiving the gift, it will influence the way they put your loan together and what documentation they will need up front.  Transparency is always the best practice when applying for a loan, even if you don’t think it’s important.

 

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Justin Scott