So many “first time” homebuyers get help from a relative with their closings funds. I rec’d the information below today from a local lender. This tells what the latest guidelines are in reference to each kind of loan.
We have had so many issues lately on funds to close that I thought I would just send out a refresher on gifts to borrowers for closing costs and down payment for you to share with your buyers. If someone other than buyer gives money for the down payment then it is a gift. If the funds are drawn from an account that is not joint (for instance we are doing loan with husband but the funds to close come from wife’s account, then that is a gift.) The realtor can never give a gift to borrower for down payment or the earnest money. The only funds that can be given between realtor and borrower are concessions per the contract- and these would fall under the seller/realtor concession guidelines and can be used only for closing costs- never for down payment.
Here is a summary of gift rules for the different types of loans:
FHA: Buyer can get a gift from a family member for down payment and closing costs without putting a minimum down payment of their own funds. The gift must be documented by:
1.Letter from family member stating relationship, amount, source of funds- we have standard letter for this
2.Documentation showing the donor had the funds at least 30 days prior to giving to borrower (this can be a bank statement, or they can have their banking institution sign the gift letter)
3.Back up documentation showing the withdrawal of the funds from the donor’s account and a copy of the cashier’s check or wire transfer (we prefer this be made out directly to title company)
Buyer can get a gift from a family member for down payment and closing costs without putting a minimum down payment of their own funds. The gift must be documented by:
1. Letter from family member stating relationship, amount, source of funds- we have standard letter for this
2.Copy of cashier’s check or wire transfer
Buyer can get a gift from family member as follows:
1.If loan to value is over 80%, then borrower must have their first 5% of down payment from their own funds
2.If loan to value is 80% or less, then all of the down payment can be a gift.
3.We just require a gift letter to be completed (we have this form letter) and copy of the cashier’s check or wire transfer