Mortgage Down Payment Gift
Many young homeowners, especially first-time homebuyers, use a cash gift (down payment gift) to help with a down payment on a home. There are certain restrictions and guidelines a borrower must follow when using a cash gift for a down payment.
How to Get Down Payment Assistance
There are mortgage down payment gift rules when it comes down to who can gift you money for a down payment. Typically, a mortgage down payment gift will come from relatives or close friends. A mortgage lender must ensure that all of the money in your bank account that is used to qualify you for a loan is, in fact, your money. Even though a mortgage down payment gift is allowed, the mortgage lender must review any large deposits (such as a gift) and verify the source of the money. These steps are taken to ensure you can truly afford your monthly mortgage payments.
Down Payment Gift Letter
If you are using a gift towards your down payment, you will need a down payment gift letter. A gift letter is a letter from the donor stating that you do not need to pay back the money. The mortgage lender will review your bank statements as well as the donor’s to make sure the gift money came from and is in the respective accounts.
The down payment gift letter must include the following:
- Your name and the donor’s name
- The dollar amount of the gift
- Your relationship with the donor (daughter, cousin, friend, etc.)
- A statement from the donor stating that you do not need to repay the gift amount
- The address of your subject property
- Where the gift money is coming from (investment account, checking account, savings account, etc.)
- The donor’s signature
Always remember to keep proper documentation regarding your down payment gift. It is essential to explain to your mortgage lender where all the money is coming from in your accounts.