Getting a Gift for Your Down Payment?

So you’re opening gifts at Christmas and guess what? Grandma wants to gift you a check for a down payment on a home. Awesome, right? Well, before you deposit that fat check, make a call to your mortgage broker. You can’t just have funds magically appear in your bank account and expect the lender to not ask where they came from. There’s a few ways that you can handle gift funds when purchasing a home. Here’s some choices:

1) Deposit the funds right away. Then wait. What you’re doing is “curing” the funds. Which means that the lender only goes back so far in your bank records to look at your money. So if they go back far enough, and the money has always been there, there will be no question about where the money came from. Rule of thumb is about 100 days. Banks generally want two to three months’ worth of bank statements for review. So they can’t see that deposit on the statement, because they’ll want to know where it came from.

2) But what if you don’t have the time? Well, if Grandma wants to give you money, and you want to close asap, follow the lender’s direction exactly as to what you need to do. They will need a paper trail for the money, both where she got it from, and where you got it from, where you deposited it, when, etc. They will also need a “gift letter” showing that it is indeed a gift, and not a loan.

Just make sure, whatever you do, your lawyer and your mortgage broker/loan officer/bank all know that you’re getting gift funds.

Happy holidays, everyone!