How to Use Gift Funds To Buy A Home

With most loan programs, you can accept a gift to be used for 100% of your down payment, closing costs, and/or earnest money. However, there is an exact process for accepting gift funds that we both must follow to comply with Agency Guidelines (not just our bank’s guidelines).

A gift for a down payment using FHA financing may come from sources such as: family members, close friend, the borrower’s employer or a charitable organization such as a church. With that said, HUD/FHA clearly states that these funds must be completely documented (paper trail from source, meaning a copy of the donor’s bank statement showing the ability for them to gift the money) and the donor must complete a gift letter. We will provide you a copy of a blank gift letter to complete.

On the other hand, a FANNIE MAE or FREDDIE MAC loan (conventional loan) allows for the donor to wire the gift funds to escrow eliminating the paper trail process for having to request a copy of the donor’s bank statements.

Watch this short video, it will help….

Please share this info with the donor!

Accepting money for a down payment is a 3-Step Process:

how-to-use-gift-funds-to-buy-a-home1 – Get a Gift Letter

A Gift Letter is required by FHA, VA and USDA underwriting guidelines We will provide you a gift letter that contains:

  1. The amount of gift

  2. The donor’s name

  3. The subject property address

  4. Verbiage indicating the gift is NOT loan, and needs not repaid

  5. Signatures and dates from both donor and recipient

2 – Receive Money from Donor

The donor (gifter) needs to make a clear paper trail documenting where the money came from and the form in which it will be transferred to the recipient. Make sure you follow these steps to a “T”:

  1. Provide a bank statement showing the donor has the funds available
  2. Provide a copy of the check or wire transfer (money order or check is the best option)
  3. The gift much match the amount on the gift letter

Click here to apply and get pre-qualified

3 – Depositing the Gift Funds

It is important to remember that when you deposit the gift funds to follow these three steps:

  1. Do not commingle the funds, meaning: If you receive a gift of $6,000, only deposit $6,000 at that time
  2. After the deposit is made, request a copy of the check from the teller
  3. Finally, after the deposit is made, request an update account balance statement reflecting the deposit

If you follow the above-mentioned steps to a “T” you can avoid costly hang-ups in underwriting.

Click here if you would like a copy of the Gift Funds Checklist along with a Gift Letter form or call me at 240-367-9525.

Click here to apply and get pre-qualified

I can be reached directly or via text message at (240) 674-3665.
You may also e-mail me at

DISCLAIMER: All loans are subject to credit approval and underwriting approval. This is not a commitment to lend.

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