How to Receive Home Down Payment Gifts

Receiving gift funds for a down payment on a home can make owning a home turn from a dream into reality. But did you know there is a proper way to receive home down payment gifts? Before simply depositing the sum, read on to learn the right way to handle your gift.

Down Payment Gift Letter

In order to properly proceed with a mortgage transaction that utilizes a gift, you must complete a down payment gift letter, which will be provided by your lender. The letter must contain the following information: the gift amount, the address of the home you're buying, the relationship of the donor to the recipient, and a statement declaring the gift is not a loan and does not to be paid back.

Documentation of Gift

The next step is to document the gift. If the gift is wired at closing, you will need to provide the donor's wire receipt showing their name as the donor and evidence that the funds actually left their account. If the gift is given prior to closing, a cancelled check or a letter from the donor's bank that the funds left the account will be necessary. For FHA loans, a bank statement from the donor showing the ability to donate such a gift is required when the loan is submitted to an underwriter for approval.

Acceptable Donors

A gift can typically be provided by a parent, grandparent, child, spouse or domestic partner, fiancé, sibling, or any other individual who is related to the borrower by blood, marriage, adoption, or legal guardianship.  The donor may not be, or have any affiliation with, the builder, developer, real estate agent, or any other interested party to a transaction.

There are other nuances regarding how to handle down payment gifts, but partnering with Butler Mortgage will give you the confidence that everything will be handled properly so that you will get approved for your new home. We have over 25 years of helping buyers like you obtain mortgage loans in the Central Florida area. Visit our website or call 407-931-3800 for a free consultation.