FHA and Conventional mortgages allow you to use cash gifts from family, friends, buyer assistance programs and your employer. However, you cannot accept cash contributions from a lender, home builder, home seller or real estate agent – basically, from anyone who stands to benefit from the transaction.

FHA loans allow all of your down payment funds to be sourced from a cash gift. The minimum down payment of 3.5% can come entirely from gifted funds, or a combination of your own funds and gifted funds. However, if you have a low credit score, the lender may require you to contribute some of your own money, even if the gifted funds meet the minimum.

Conventional loans are a little different. If you put less than 20% down with gifted funds, the lender may require you to contribute some money of your own. The exact amount depends on your credit score, the loan parameters and the PMI company. (If you have at least 20% down and it’s entirely from gifted funds, that’s fine.)

USDA loans and VA loans do not require a down payment. Gifted down payment funds are allowed if the borrower wishes to use them.

In all cases, a gift letter must be provided to prove that the funds are free and clear of any repayment obligation. You can see a gift letter example by following this link.

Next, there must be a paper trail for the funds that are gifted. The person issuing the gift should supply the following:

• Bank statement showing proof of funds, before the gift is issued.
• Bank statement showing the same account directly after the gift was issued.
• If a personal check is issued for the gift, a copy of the cleared check will be required.

You should open a new account upon receipt of the gift funds. Deposit the full amount of the gift by itself; do not add or subtract any funds, and don’t swap money around from other accounts. If more gift funds are received, you can add them to this account, but the issuer must follow the same documentation steps. Keep proof of your gift deposits! Your lender will want all this paperwork, and perhaps more, so maintain good records.

This might seem like a lot of red tape, but it could bring you closer to home ownership! We’ll be happy to refer you to trustworthy, local lenders who can walk you through your mortgage options.

As your Exclusive Buyer’s Broker, we serve your best interests at all times! Unlike real estate agents and brokerages who represent sellers, as an Exclusive Buyer’s Broker, we only represent you, the buyer, getting you the best price and terms with no conflict of interest.

Understanding this distinction could literally save you thousands of dollars not only on the purchase price and terms, but also on seller concessions and home inspection issues, whether you are a first-time homebuyer or an experienced homeowner!

Contact us with your home buying questions! Remember, we are with you every step of the way…all the way home!

Andrew Show
Broker, CEBA, CEBA-M, CNE, CSP, ABR-M, e-PRO, GREEN
Buyer’s Resource Realty Services
Serving Metro Columbus, Ohio with Exclusive Buyer’s Agents
7100 North High Street, Suite 204, Worthington, Ohio 43085
614-888-4110 | 888-888-4110 Toll Free | 614-839-4110 Fax

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