FHA Gift / FHA Gift Letter
FHA Homebuyers, If you are considering receiving a gift for the down payment then there are some FHA gift guidelines and requirements you should be aware of which can help make your loan process go easier and more pleasant. Plus your loan officer and lender will be grateful.
Gift funds are in your account already now what?
You will need to get a copy of the withdrawal document showing that the withdrawal was from the donor’s account along with your deposit slip and bank statement showing the deposit.
What if the gift funds are to be provided at closing and are in the form of a certified check from the donor’s account?
Then a bank statement showing the withdrawal from the donor’s account and copy of the certified check would be needed.
What if the gift funds are to be provided at closing and are in the form of a cashier’s check, money order, official check, or other type of bank check?
Then have the donor provide a withdrawal document or canceled check for the amount of the gift, showing that the funds came from the donor’s personal account.
What if the gift funds are to be provided at closing and are in the form of an electronic wire transfer to the closing agent / escrow?
The donor then needs to provide documentation of the wire transfer.
What if the gift funds are being borrowed by the donor and documentation from the bank or other savings account is “not available” ?
The donor should provide written evidence that the funds were borrowed from an acceptable source, not from a party to the transaction, including the lender.
*** Important: Cash on hand is not an acceptable source of donor gift funds
Now that you know how to document the transfer of your gift you must also provide a gift letter.
Here is what your gift letter should have in it:
|date the letter|
|show the donor’s name, address and telephone number|
|specify the dollar amount of the gift|
|state the nature of the donor’s relationship to the borrower and that no repayment is required|
|the letter must be signed by both the donor and borrowe|
*** Reminder: In order for funds to be considered a gift, there must be no expected or implied repayment of the funds to the donor by the borrower
Who May Provide a Gift?
An outright gift of the cash investment is acceptable if the donor is:
|the borrower’s relative|
|the borrower’s employer or labor union|
|a close friend with a clearly defined and documented interest in the borrower|
|a charitable organization|
|a governmental agency or public entity that has a program providing home ownership assistance to low- and moderate-income families, or first-time homebuyers.|
Who May Not Provide a Gift
The gift donor may not be a person or entity with an interest in the sale of the property, such as:
|the real estate agent or broker|
|or an associated entity|
Gifts from these sources are considered inducements to purchase, and must be subtracted from the sales price.
Well I hope this has given you more insight and answered your FHA gift questions so that you know what to expect and how to avoid any delays or pitfalls when gift funds will be used. Each lender might have their own recommendations regarding transfer of gift funds as well as their own preferred gift letter so any concerns on gifts should be discussed with your FHA Loan Specialist.