Gift Funds For Down Payment And Closing Costs Mortgage Guidelines
This article covers the Using Gift Funds For Down Payment And Closing Costs
The Federal Housing Administration allows a home buyer to Use Gift Funds For Down Payment And Closing Costs on a home purchase. Using Gift Funds For Down Payment And Closing Costs is normally not viewed favorably but is allowed. FHA borrowers can get 100% of their down payment gifted by a relative or family member. All gifts need to be sourced. A letter from the donor of the gift needs to be signed. The verbiage needs to state that the person receiving the gift funds does not have to pay the gift back. Repayment of the gift after closing is not allowed. Using gift funds for the down payment on a home purchase. In this article, we will discuss and cover Gift Funds For Down Payment And Closing Costs Mortgage Guidelines.
Using Gift Funds For Down Payment And Closing Costs: Gifts Cannot Be Loans
Gift money cannot be loans made to the person receiving the gift. Lenders will require bank statements from the donor of the gift money. Bank Statement of the donor needs to show the gift leaving the donor’s bank account. Deposit of the recipient’s bank account. Updated bank statement of the gift recipient is required. The donor also needs to provide 30 days of the donor’s prior bank statement, history showing the seasoning of the gift funds. The lender also needs to see and document the funds being transferred or deposited to the borrower’s bank account.
Gifts Are Allowed For VA Loans And USDA Loans
Cash is non-existent in the mortgage lending industry. Any cash deposits with no paper trail cannot and will not be counted. If the donor of the gift only has cash, the donor needs to deposit that cash in their bank account, let it season for 30 days, and then release the gift money to the person he or she is gifting the funds to. All mortgage companies require 60 days of bank statements. The deposit transactions on the bank statements will be scrutinized on the 60 days of the bank statements that are submitted. Any large deposits will be questioned. To be able to use the large deposit in the bank statements in the past 60 days, the borrower needs to provide proof of the deposit and how they got it. For example, if the deposit came from funds of a sale of a vehicle, the borrower needs to show the proof of sale, title transfer, and cash receipt and/or canceled check.If the borrower has substantial amount of cash and needs to use that cash for the down payment and/or closing costs of the home purchase, the borrower needs to deposit those funds in their bank and let it season for 60 days. Any deposits that is older than 60 days will not be questioned. Cash in hand needs to be deposited in a borrower’s bank account and let it season for 60 days if the cash cannot be sourced.
Gift Funds For Down Payment And Closing Costs On Conventional Loans
Fannie Mae and Freddie Mac agency guidelines allow borrowers to use gift funds for the down payment and/or closing costs on conventional loans. Depending on the mortgage company, there may be certain stipulations on gift funds on conventional loan programs. Depending on the lender, only a percentage of the down payment may be gifted. For example, if a home buyer is required to put a 5% down payment on a home purchase, the conventional lender may require that 3% of it be own funds and the 2% may be gifted by a relative or family member. However, Gustan Cho Associates will accept 100% of gift funds to be used on conventional loans.
How To Avoid Gift Letter And Bank Statements From Donor
There are folks who do not feel comfortable asking the donor of gift funds to sign a gift letter and asking them for 30 days bank statements. Homebuyers who do have some time to purchase a home and are anticipating a gift can ask the donor to give them the gift funds as soon as possible. As long as the gift funds have been seasoned in borrowers’ accounts for at least 60 days, those gift funds will be considered own funds, and no gift letter or any other documentation from the donor is required. Remember, that mortgage lenders only are concerned with 60 days of bank statements and any deposits beyond the 60 days will not require any sourcing.
Seasoning Of Funds
This is the best and ideal way of seasoning gift funds. Automated Underwriting System gives more weight if the funds are not gifted and own funds and do not favor gift funds. Automated Underwriting System favors assets for the mortgage loan borrower. The more assets the borrower has listed on their mortgage application, the better the chance for a DU or LP approval eligible per automated findings. If AUS requires reserves, reserves cannot be gifted. Reserves need to be own funds.
Qualifying For Mortgage With Direct Lender With No Overlays
Home Buyers who need to qualify for a mortgage with a national lender with no lender overlays on government and conventional mortgage loans can contact us at Gustan Cho Associates at 262-716-8151 text us for a faster response. Or email us at [email protected] We are available 7 days a week, evenings, weekends, and holidays. The Team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.