Show Me the Money??

With changes in the current housing market, home values have decreased, supply has increased, government programs have been extended, and buyers are taking advantage.  And the timing couldn’t be better.  However, let’s suppose you find that perfect home and someone very near and dear offers to give you a generous gift of money to help with this purchase.  What do you do?  Do you need to disclose this to your lender?  Does it matter to the sales transaction?  Can you deposit the gift into your bank account?  Does there even need to be a record of this gift of money?  Is this kind gesture going to create a problem?

First, say thank you!  (Your mother raised you right after all.)  Second, don’t panic.  This very kind gesture can do exactly what the gift giver intended to do – help you.  However, the gift does need to be disclosed, it does matter to the transaction, it can be deposited, and it does need to have a paper trail.  But if you keep a couple simple steps in mind it does not need to create any problem. 

  1. Let your lender know you have a gift to include into your home purchase.  Do not head to your bank with the funds.  
  2. With the help of your lender, have your donor complete a gift letter.  This is actually a form letter that specifies who is giving the gift, where the funds are coming from (what account), who the funds are being given to, the amount given and that there is no obligation to pay the money back.
  3. Have the donor request a verification of funds from their bank.  This is also not as scary as it sounds.  Your lender and underwriter do not know Dear Uncle Joe or his financial standings.  They need to confirm that the money being given is actually available.  However, Uncle Joe does not need to divulge his entire life history.  A simple statement from his bank, on their letterhead just needs to state Uncle Joe’s full name, the account number from where the funds are coming from, and that the amount being gifted is actually available to give.
  4. Rather than a check, have your donor give you a cashier’s check made out to you and the Title (Escrow) Company.  This will avoid your need for an updated bank statement and gets the money where it needs to be – allocated for your home purchase.

And that’s it!  Just keep in mind that gift funds are meant to be just that, not temporary loans.  The part where problems often occur is when the funds are not clearly disclosed and documented.  Don’t be afraid of this.  Keep these simple steps in mind and the best of someone’s intentions can help you both out a long way. 

Leave us a comment if you have questions about gift funds or anything else related to home loans.  We’d be glad to help.

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2 Responses to “Show Me the Money??”

  1. world of warcraft afk bot Says:

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  2. Caterers Miami Says:

    as soon as I noticed this site I went on reddit to share some of the love with them.

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