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What if I’m Using Gift Funds?

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Using gift funds for a mortgage down payment can be a great way to help fund the purchase of a home. Gift funds are funds given to you by a family member, relative, or sometimes a close friend, to assist with the down payment or other closing costs associated with a mortgage. Using gift funds can be a valuable resource to make your home purchase more affordable. Here's how you can go about it:

1. Confirm Lender Policies: First, you'll want to speak with your lender (or me, your Mortgage Loan Officer) to understand their specific guidelines regarding using gift funds. Lenders often have rules about who can gift you funds, the required documentation, and how much of the down payment can come from gifts.

2. Source of the Gift: The person gifting you the funds will need to provide a gift letter, which is a formal statement confirming that the funds are a gift and not a loan. This letter should include the giver's name, relationship to you, the gift amount, the purpose of the gift (down payment), and a statement that the funds do not need to be repaid.

3. Documentation: You'll need to provide documentation to show the source of the gift funds and the transfer of funds. This could include bank statements from the giver showing the withdrawal of funds and your bank statements showing the deposit of the gifted amount.

4. Transfer of Funds: To ensure a smooth process, it's essential that the funds are transferred properly. Ideally, the gift funds should be transferred directly from the giver's account to your account. Avoid mixing the gift funds with your own funds, as this could complicate the verification process.

5. Gift Letter: The gift letter, along with the giver's bank statements and any other required documentation, should be submitted to your lender as part of your mortgage application package.

6. Underwriting Process: During the underwriting process, the lender will review the gift letter and supporting documentation to ensure that the funds meet their requirements. They'll want to confirm that the funds are a true gift and won't create additional debt for you.

7. Closing: Once the lender approves the use of gift funds, the funds can be applied towards your down payment during the closing process. The gift funds will be listed on your Closing Disclosure, which is the official document detailing all the costs and credits associated with the loan

If you have any questions or concerns, please don't hesitate to reach out. I'm here to help you navigate the process and make your home-buying journey a smooth one. Lynette, Team Arrasmith

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