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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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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