Mortgage Tip: How Gift Monies Work

People purchasing real estate today often times are faced with procuring gift monies in order to bridge the gap between being preapproved to closing escrow on a property.

Many times gift monies can be an excellent source of additional funds needed for loan qualifying or down payment purposes. If you are going to be purchasing a property and know that you’re going to be needing gift funds, here’s some information you need to know about gift monies.

Mortgage Tip: Gift monies on a mortgage loan transaction must be seasoned.

This means that if you’re going to be receiving a gift for a conventional loan, Home path loan, FHA Loan or even a USDA 100% financing loan, the money for the down payment must come from a person who has the ability to gift the money.

Monies can come from any sort of an asset bearing account. Some typical examples are:

  • bank account
  • money market account
  • retirement account
  • 401(k) account
  • IRA account
  • investment account

Put another way, mortgage loan lenders need to make sure the money is traceable. A paper trail is required to source these monies.

Let’s say that John Father is giving Susie Daughter $10,000 to purchase a property. Suzy daughter goes to John father and gets John father’s full bank account statement with all pages with a signed gift letter from him showing he has the ability to gift that money. At the close of escrow, John Father can simply wire the money into escrow and the transaction can successfully record.

Here’s another mortgage tip about gift monies.

* Gift monies can come from anyone. As long as these monies are sourced, you can use these monies as funds to close escrow for a mortgage purchase transaction.

Mattress money is not allowed. Mattress money is money that is sitting at home in a big safe or under the bed etc. This money could come from anywhere and as a result it’s not permitted.

There is an exception to this rule. In order to consider this money valid for gift funds, this money needs to be in a bank account for a period of two months. Mortgage loan lenders look at bank statements for the last two months. They will look at asset account statements for the last two months or the last two quarters if the account is quarterly.

For example if there is $10,000 sitting home under the bed and you go and put that money in the bank, it will be eligible for gift fund use in 60 days.

An easy mortgage tip to remember is the gift monies are a great source of funds if you are short on cash to close.

Sometimes, mom and dad and/or the grandparents or even a friend or another family member could be an excellent source of funds to to help you close your purchase or refinance transaction. Gift monies are only permitted on primary residence and second

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RELATED MORTGAGE ADVICE FROM SCOTT SHELDON

When buying a home, it’s natural to want the lowest mortgage rate possible. But sometimes, chasing a slightly better rate from another lender—especially after your offer has already been accepted—can backfire in a big way. Let’s walk through a real-world scenario. You’ve got an offer accepted on a house. You’re working with a lender who has you approved, documents in underwriting, and a 21-day close of escrow in place. Everything is moving forward. Then you hear from another lender offering a rate that’s 0.25% lower, with slightly better closing costs. It’s tempting. But before you make a jump, here’s what you need to consider. Switching Lenders Comes with Time Costs When you pivot to a new lender mid-contract, they’ll need to: Re-underwrite your entire loan, Order a new appraisal, Disclose and sign new loan documents, Submit the file for final loan approval, Schedule and fund closing—all over again. This doesn’t happen overnight. Even in ideal circumstances, the new lender is likely going to need at least 25–30 days to close. If you’re in a fast-moving or competitive market, this is a real problem. Most sellers won’t grant a contract extension just because you’re switching lenders. So, what happens next? A Contract Extension Can Jeopardize Your Deal Asking for a contract extension means the seller must agree to delay closing. But that delay introduces risk—especially if the seller has backup offers or simply wants certainty. They may not grant the extension. Or worse, they could cancel the deal outright and take another buyer’s offer. Even if the seller agrees to extend, your earnest money and negotiation power could take a hit. And for what? A slightly lower rate that might save you $50 to $75 a month? Mortgage Rates Aren’t as Far Apart as You Think Here’s the truth: all mortgage lenders get their money from the same place—the bond market. The pricing differences between lenders usually range from 0.125% to 0.25% in rate on any given day. If one lender seems to be offering dramatically better pricing, the first thing you should ask is: How? Head over to FreddieMac.com and check the average 30-year fixed rate posted weekly. This is one of the most reliable benchmarks for where rates truly stand in the market. If a lender is quoting you a rate that’s well below that average, ask for the details: Are they charging extra points? Is this a teaser rate with a prepayment penalty? Is it based on a different loan product or risky structure? Often, what sounds “too good to be true”… is. Consider the Bigger Picture Think long-term. If you’re financing $600,000, a 0.25% lower rate may reduce your payment by roughly $75/month. But what if you lose the house and have to start over? That monthly savings doesn’t mean much if you’re outbid on your dream home or lose your deposit. Also, remember: you’re not going to keep this rate forever. Today’s homebuyers typically refinance when rates drop by about 0.75% or more. So if rates fall within the next year or two, you’ll likely be refinancing anyway. Instead of paying extra points now or risking the entire deal for a minor monthly savings, it may be better to accept a slightly higher rate—knowing you’ll refinance when the time is right. The Real Risk Isn’t the Rate—It’s the Delay When shopping for a home loan, don’t just ask, “What’s your rate?” Ask: Can you close on time? Is this rate sustainable or based on hidden costs? Will switching lenders delay or jeopardize my contract? A home purchase contract is a binding agreement between you and the seller to perform within a set timeframe. If you can’t meet those dates because you're chasing a slightly better rate elsewhere, you may want to reconsider if now is the right time to buy. Final Thoughts Yes, interest rates matter. But execution matters more. Before making a switch mid-transaction, talk to your lender. Have an honest conversation about pricing, timelines, and strategy. You might find that staying the course, securing the house, and planning to refinance later offers a better path to financial security. Want to Know Your Options? Let’s compare rates and strategies the smart way—without risking your dream home. 👉 Click here to get a custom rate quote today.

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3 Comments

  1. […] less than 20% equity using conventional financing will require a minimum down payment of 5% contribution from the buyer, using an FHA loan will require no minimum down payment from buyer, seller can full gift down payment […]



  2. […] less than 20% equity using conventional financing will require a minimum down payment of 5% contribution from the buyer, using an FHA loan will require no minimum down payment from buyer, seller can full gift down payment […]



  3. […] less than 20% equity using conventional financing will require a minimum down payment of 5% contribution from the buyer, using an FHA loan will require no minimum down payment from buyer, seller can full gift down payment […]



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