What Are Gift Funds And How Can I Use Them To Purchase A Home? – Stress Free Mortgage

When purchasing a new home, there are so many aspects to consider. One of the major questions that we know is top of mind for buyers is where am I getting the money for a down payment?
Although sometimes people do have savings for a down payment, others may need to rely on help from family members to purchase a home. So how can your family member help with this generous gift?
If you are purchasing a property using a conventional loan, all of your down payment and closing costs can be a gift. What a gift within itself! This means your lender will provide this family member(s) with a “gift letter” to sign, which simply states this is a gift and no repayment is necessary.
How can your relative give this wonderful gift? When it comes to actually giving the physical funds, we always encourage the gift money be sent directly to the escrow company handling your purchase. The reasoning is simple, if these funds are given to you directly (as the borrower), we will need to show proof of where these funds came from, such as through a bank statement. Avoid this extra step and have your relative send gift funds directly to the escrow company.
Note: If you are using an FHA loan, you will be required to show the bank statement where the gift funds are coming from regardless of when or where the funds are given.
Lastly, there are slightly different requirements of who is considered a “relative” and allowed to gift you these funds depending on the type of loan you are using. Reach out to Stress Free Mortgage today to get more information on gift funds!