If you lack the funds for a down payment on a home, there are various options available. You could pick a loan program without a down payment requirement, use a down payment assistance program or use gift funds.
Gift funds can help relieve some of the stress of buying your home. But, using gift funds isn’t as simple as cashing in all the birthday cards your nana has given you over the years. Using gift funds to supplement some of your down payment comes with some rules.
What Are Gift Funds?
Gift funds are a lump sum of money given to you to assist you with your home purchase. This money commonly comes from family members, but depending on your loan program can come from other people. This can come from:
- Charitable organization
- Labor union
- Approved Government Agency
It differs on the loan program that you use and it is best to speak with a mortgage consultant before texting your entire family asking for gift funds. Click here to schedule an appointment.
What Are The Rules?
You Will Need A Gift Letter
The most important thing to know about gift funds is that it needs to be a gift (self-explanatory right?). In order to prove that this is a gift and not a loan, the giver will need to write what is called a gift letter. This is a note that essentially explains that this is a gift and does not need to be paid back.
This letter will need to contain personal information such as:
- Dollar amount
- Date of transfer
- Property address
- A statement that no re-payment is needed
You Will Need To Show Documentation
You will also need to show documentation of the transfer of funds. This could mean bank statements from both the giver and your accounts. The lender will need to confirm the correct amount of money is coming from the giver’s account and being deposited into your account. These bank statements can take many business days to receive, so it is important to prepare the giver before you start the process.
Often, the giver doesn’t understand how intensive the gift funds process is. It is important to set those expectations before starting the process. If the giver decides to withdraw their gift due to the process, this could delay or disrupt your loan.
Curious about how gift funds could help you get into a home? Click Here and speak with an experienced mortgage professional and schedule your free home loan consultation. We will go over your current financial situation, homebuying goals and a plan to make your dreams come true.