As mentioned in a previous blog post, gift funds may be an option for some borrowers for down payment and closing costs for a mortgage loan. To start, gift funds are funds provided to a borrower from a relative that is either a relationship from blood (kin) or from legal standing (in-laws, legal guardian etc.) In addition, gift funds can also come from people who have a long-standing, family-type relationship with the borrower. In those cases, the relationship history must be documented. The most important thing to remember is that the relationship for the gift cannot arise out of the transaction.
Gift funds can be used on primary residence transactions and in limited cases on a second home transaction. Gift funds cannot be used for investment property transactions. In all investment property transactions, all the funds for the down payment and closing costs must come from the borrower’s own available funds.
When using gift funds, a gift letter is required, and it must indicate that no repayment is due or expected from the borrower back to the donor. Further, the donor’s funds must come from an acceptable source. All funds provided by the donor must be in US currency or converted into US currency. Funds from overseas may be subject to further review to determine the acceptability of the funds.
Gift funds may be given to the borrower in advance or at the time of closing. Depending on when the gift funds are being passed to the borrower will determine what documentation is needed to complete the transaction. The lender will notify the borrower of the proper documentation needed.
As with any mortgage transaction, there are certain requirements that must be met. Please contact your Googain Loan Officer for more information.