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How Does Receiving a Down Payment Gift Work?

Dec 05, 2019

Estimated Reading Time: 2 minutes 

Imagine that as your Christmas gift this year, one of your family members decides to gift you money for a down payment on your first home. What an amazing gift that can help make your American Dream finally come true, right?  

In fact, the 2019 Profile of Home Buyers and Sellers report from the National Association of Realtors revealed that more than 30% of first-time homebuyers used down payment help from family and friends. While your first thought may be to break out the champagne to celebrate - there are some important mortgage down payment gift rules to understand before continuing on your homebuying journey.

Who Can Gift me Money for a Down Payment?  

The donor of the gift must be a family member, fiancé or domestic partner. They must prove they can provide you with the gift by providing a copy of their bank statement, a copy of the canceled gift check and/or a signed letter from their bank saying the funds are available.

Down Payment Gift Documentation 

 The gift letter is a form we will provide. The donor will need to complete it with basic information and a signed statement that the funds are a gift with no expectation of repayment.

The transfer must be documented carefully. Make a copy of the gift check and deposit slip or confirmation of the wire transfer. Deposit the gift in the account you're already using for verification of funds to close. DO NOT combine this deposit with any other incidental deposits. Provide either an online update or the next account statement to show that the deposit cleared into the account.

How Much Can You Accept as a Gift for the Down Payment?

Some programs allow for the entire down payment to be in the form of a gift. Others may require that you have at least 5% of the purchase price from your funds. As these rules can vary or change at any time, never hesitate to consult with us for the specifics as they relate to your transaction.

While the documentation requirements may seem excessive at times, please remember that the underwriters are simply following the rules to assure that your down payment is not borrowed and that any allowable gift funds are coming from acceptable sources.

The process of documenting your gift for your down payment just got easier with these important guidelines. If you have any other questions please reach out to our knowledgeable mortgage professionals. One step at a time, we will help you through your home buying process. Contact us today to start your journey toward homeownership. 

Related Articles: Why Buying a Home During the Holidays is a Good Idea.