When obtaining a mortgage, lenders want to know where your down payment money is coming from. Sometimes it comes from your retirement account, bank account, a down payment assistance program and sometimes even gifted by someone. Today we are covering a gifted down payment.
A down payment gift is money given by someone to a homebuyer to help them afford a mortgage down payment or closing costs. There are rules that apply when receiving a gift. You’ll need to ask your lender about the rules imposed by the mortgage company and/or government agency insuring the loan.
With FHA loans, money can be accepted for down payment and closing costs. You can receive the gift from a family member, friend, employer, charity organization or government agency.
With VA Loans, money can be received from any donor except real estate agent or loan company.
With Conventional loans, money can be received from family members or romantic partners. Funds can’t be used for investment properties.
You will be required to disclose on an application if you are receiving a gift. A lender will also require a gift letter from the donor. The lender will guide you. Gift money can not be repaid as a requirement from the lender. If it is a loan, the lenders will take that into account when reviewing your mortgage application.
There are alternative options to receiving gift money from someone. Make sure to reach out to your mortgage lender prior to receiving any funds and to discuss what options you have.