Are you getting gift money to use for the down payment of your new home? If so, here are a few things you must know before funds start changing hands.
The Donor:
The donor of the gift must be a family member, fiancé or domestic partner. They must prove the ability to provide the gift. This proof can be a copy of their bank statement, a copy of the canceled gift check or a signed letter from their bank evidencing the availability of funds. The underwriter’s discretion is always at play here, so more than one of these items may be required.
The Gift Letter:
We will provide a form for the donor to complete and sign. It will include items such as the donor’s name, address and relationship to you; the donor's account information; the property being purchased; the dollar amount of the gift; and the date or approximate date of transfer, along with a statement that the funds are a gift with no expectation of repayment.
The Transfer:
Documenting the transfer is vitally important. The donor should give the gift in the form of a check or wire. If by check, make a copy then deposit it in the account that is already being used for verification of funds to close. DO NOT combine this deposit with any other incidental deposits. You should provide a copy of the deposit slip or confirmation and either an online update or the next account statement to evidence that the deposit cleared into the account.
Mortgage Programs You can Use Gift Money With:
Some programs allow for the entire down payment to be in the form of a gift. Others may require that you have at least 5% of the purchase price from your own funds unless the total down is 20% or more. As these rules can vary or change at any time, never hesitate to consult with us for the specifics as they relate to your transaction.
While documentation requirements may seem excessive at times, please remember that underwriters are simply following the rules to assure that your down payment is not borrowed and that any allowable gift funds are coming from acceptable sources.
Questions? Reach out to our team today! We are happy to help.
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