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Yes, in many circumstances mortgage programs permit eligible gift funds to be used toward certain home-buying costs.
But this is one of those situations where the phrase:
“Just Venmo me the money”
can turn a simple transaction into a documentation mess.
Talk to the lender first.
WHY DOES THE LENDER CARE WHERE THE MONEY CAME FROM?
Because financing guidelines require the lender to understand the source of certain funds used in the transaction.
They may need to determine whether the money is truly a gift or actually a loan that creates another repayment obligation.
WHO CAN GIVE A GIFT?
Rules can depend on the loan program.
Eligible donors and documentation requirements differ.
Ask your lender before assuming anyone can contribute.
WHAT IS A GIFT LETTER?
When required, the lender may request a written statement documenting the gift and confirming applicable information about the funds.
The lender will provide the correct requirements.
See how gift funds work for the documentation picture.
DO NOT PRETEND A LOAN IS A GIFT
Mom says:
“I'll give you $30,000, but you owe me $500 every month.”
That sounds a lot like debt.
Do not tell the lender something is a gift when there is a repayment agreement.
WHEN SHOULD FAMILY TRANSFER THE MONEY?
When the lender tells you how and when to do it.
Not six months later.
Not impulsively.
Follow the documentation process.
SHOULD I USE THE GIFT FOR DOWN PAYMENT OR KEEP SOME CASH?
Good question.
Maybe increasing the down payment improves the loan.
Maybe retaining reserves is more important.
Maybe the money is better used toward closing costs.
Ask the lender to compare scenarios.
