Homebuying June 26 2018

Getting a Down Payment as a Gift

Congratulations! You’re about to buy a home and you have someone in your life generous enough to help you achieve that dream. Or maybe you’re considering tugging on the old heartstrings to make that a reality. If you already have proof of income and a strong credit score, you can use gift money for a down payment on a home, but there are a few rules:

Send a Signed Statement to Your Mortgage Lender

Any gift deposit more than 25 to 50 percent of your total monthly income has to be documented in a gift letter if it’s going to be put towards a down payment. You and the donor must both clarify that the funds are a gift. This includes the following

  • A signed explanation that you’re not expected to pay them back.
  • The amount of money to the exact dollar.
  • The type of account (savings, checking, etc.).
  • The expected date of money transfer.
  • Your relation to the donor.

Follow this process for each gift donation—yes, each one gets its own letter and bank account!

Leave a Paper Trail to Help the Lender Track Funds

Huge sums of borrowed cash, such as a credit card cash advance, would imply you’re not able to commit to a mortgage without racking up debt. Here’s how to validate your down payment money as a gift:

  • Deposit the gift into its own account and save a receipt. The last thing you want to do is pull from multiple accounts when you’re trying to prove the source.
  • Provide two months of bank statements. Some loans will also require your donor’s bank statements. Prepare full documentation.
  • Send copies for verification. Photocopy the check or present paperwork verifying electronic transfer.
  • Keep a record of when the gift leaves your account. Not always necessary, but good to have on hand.

 

Schedule a Call

 

Know Your Loan Restrictions on a Gift Amount

Research how much gift money your specific loan allows to be used for a down payment. We’ve pooled a few common loan types and minimum contributions:

Conventional

  • For a down payment of 20 percent or more, the entire down payment can be a gift. Any less, and you must pay part with your own money.
  • Gift money can only be used on primary residences and second homes (no investment properties).

FHA and VA

  • The entire down payment can be gift money.
  • If you have a credit score between 580 and 619, you must pay for at least 3.5 percent of the down payment yourself.
  • Gift money can only be used on primary residences.

 

Know Your Loan Restrictions on a Gift Donor

Depending on the insurance company, the donor’s relationship to you can include the following:

  • A family member, including fiancé
  • Close documented friend (such as a godparent)
  • Employer
  • Charity
  • Government agency providing homeownership assistance

Lenders can consider exceptions, but the gift donor can’t have an interest in the property sale. For example:

  • Seller
  • Real estate agent
  • Builder

Any money given to you by these parties would be considered a reduction in the sale price and would have its own effect on mortgage loan rules.  

  Now that you’re ready to draw up your gift letter, here are a few important reminders:

Provide Enough Time for Transfer

Your gift letter and the deposit are required to be processed and documented before closing your mortgage.

Warn Donors About Gift Tax

Anyone can gift up to $14,000 per year tax-free. So in an ideal situation, your own parents could gift you and your spouse a joint total of $56,000 with four separate checks (one from each parent). Greater sums have to be accounted for come tax season.  

Speak to a Loan Officer

  References:  

Search Results for query

December 02 2019

12 Days of Savings

From family meals, travel, gifts, and social outings, the holidays are one of the most expensive times of the year. We have compiled some tips to help you spend mindfully during this holiday season.

Read More

November 27 2019

Market Update: FHFA Announces Loan Limit Increases

The Federal Housing Finance Agency (FHFA) has announced that the conforming loan limits will be increased to $510,400 in 2020

Read More

November 20 2019

Why Interest Rates Aren’t the Only Thing That Matters

Shopping for the lowest rate when looking for a lender could be a detriment to your homebuying experience. There is much more that goes into a positive homebuying experience than the mortgage price tag. If you place a value on communication, timeliness,...

Read More

November 14 2019

Homebuyer Solutions Group Success Story

Marylynn M. and her husband successfully improved their credit scores while enrolled in Eagle Home Mortgage’s Homebuyer Solutions Group (HBSG) program and were able to purchase their dream Lennar Home after graduation. We spoke to HBSG Credit Specialist,...

Read More

November 07 2019

Home Organization Tips to Spark Joy

There is a proven correlation between home clutter and stress. Organizing your abode is a quick and relatively easy way to bring more joy (and extra time) to your life. Here are some home organization tips to help you spark joy!

Read More

October 30 2019

Find the Right Home Loan For You

There are several types of mortgage loans that fit various needs. Here is some information about some of the most popular products and why they might work for you.

Read More

October 24 2019

Reverse Mortgage Myths Debunked

As a senior, age 62 or older, a Reverse Mortgage enables you to tap into the equity of your home and benefit you financially today! The funds you receive can be used to eliminate your monthly mortgage payment, pay off debt, increase your monthly cash flow, or...

Read More

October 17 2019

What to Expect: The True Cost of Homeownership

Most soon-to-be homeowners are prepared to budget for their mortgage payment and down payment, but you should go into your dream of homeownership with a clear picture of all of the costs associated with this milestone.

Read More

October 09 2019

A Simpler Path to Homeownership with Credit Solutions

Interview with Credit Specialist, Sara Gellatly, to learn more about what HBSG is and how it helps real customers achieve their dream of homeownership. 

Read More

12345Last

Mortgage Calculators

Crunch the Numbers With Our Helpful Mortgage Calculators

Payment Calculator

payment calculator

Payment
Calculator

Affordability Calculator

affordability calculator

Affordability
Calculator

Refinance Calculator

refinance calculator

Refinance
Calculator

The Modern Digital Mortgage with a Personal Touch

Paperless. Effortless. Awesomeness TM

Simplify the home financing process with our Digital Mortgage. We'll be here to help navigate you through the entire process.

Get Pre-qualifiedWhat is a Digital Mortgage?