Everyone loves gifts – especially if the gifts help you buy a house. What are the gift fund requirements and how can you avoid mistakes that prevent you from buying a home.
Example of Gift Funds in Home Purchase
I recently had a borrower who received a cash gift from her father; although the father had earned the money, he had never deposited the money into his bank account. If the dad had put the money in his bank account first and then given the borrower the cash, she would have met the gift requirement. Luckily for the borrower she had other relatives that wanted to gift her the money.
Conventional Mortgage Requirements on Use of Home
For conventional financing, gifts can be used for primary residence and second home purchases. If you try to buy a home as an investment property with gift funds, you will be declined.
Gift Sources for Home Purchases
Who can provide the gifts? A relative, a fiancé, domestic partner, spouse or any other individual who is related to the borrower by blood, marriage, adoption or legal guardianship.
Required Documentation for Gifts
- First, signed gift letter provided by the lender.
- Second, verifying donor availability of funds which is either the cancelled check for a gift or bank statement showing the terms of withdrawal.
- Third, the transfer funds and the borrower’s bank account by providing the updated bank statement.
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