First and foremost, please let us know if any of the funds will be a gift so we can help you with the paperwork. A “gift” is considered any money that belongs to a person that is not applying for the loan. Note: money that has been seasoned in a bank account longer than 90 days is “seasoned” and is no longer considered a gift.
For example: if a married couple each has individual checking accounts, and only one of them is applying for the loan, any money used from the non-purchasing spouse’s account will be considered a “gift.” If you will be receiving any gift funds for any part of the transaction then please do so in an acceptable manner and provide the necessary gift funds documentation. Here’s what you need to know:
- Gifts cannot be in cash – we must be able to document the source of the funds
- Gifts cannot have expected repayments. This does not mean someone can’t repay them, it just can’t be expected or implied.
- The Donor will need provide asset statements to source the funds’ origins. (You can thank the Patriot Act for that).
We are not Uncle Sam and it is not our responsibility to report anything to the IRS. Likewise, the IRS is not involved during the mortgage process – only parties interested in originating and servicing the loan will have access to the loan’s information.
Gift Funds Document
Here’s what you and the Donor need to do in order to properly document gift funds:
Step 1: Sign a Gift Letter
We will send you a template letter (see below) that states that there aren’t any expected repayments. You will fill in the blanks relating to the amount of the gift, the address of the subject property, the relationship between you and the person giving the gift, and you and gift giver MUST sign and date the letter.
Step 2: Provide a Paper Trail
You and the Donor need to keep a detailed paper trail of the entire gift transaction. The Donor can send the money directly to you via check or wire (i.e. NOT cash) and/or even send the funds directly to the title company if they prefer. For example, if the Donor cashes in a CD, sells stock, etc. then they need to make sure they document the liquidation of the CD, sale of the stock, etc. Documentation could include asset statements, bank statement, or any other documentation the lender requires.
Step 3: Document Receipt
Once you deposit the funds (or the wire is received) you will need to provide an updated bank statement showing the funds as available. What you need from the bank when you make the deposit: collect a receipt from your deposit at the bank; keep this as documentation to give to the lender. DO NOT deposit any other money along with this transaction; your receipt should match your gift funds exactly. If you have more than one gift deposit, do each one separately.
If you have any questions, please give us a call and we’ll be happy to walk you through the process.
Gift Letter Sample
I/We do hereby certify to the following:
I/We (Donor) have made a gift of $ dollars to the Borrower(s) named below, and no repayment of this gift is expected or implied either in the form of cash or future services of the recipient.
This gift is to be applied toward the purchase of the property located at:
The source of funds for this gift is:
Bank Name: __
Type of Account: [ ] Checking [ ] Savings [ ] Other
Account No.: _
Relationship to Borrower:
Donor’s Name:
Street Address:
City:
State: Zip:
Donor Telephone: – –
* Donor Signature: Date:____ __
* Borrower Signature (Recipient): Date:_____ __
* Borrower Signature (Recipient): Date:_____ __
* Please Note: Upon the signature(s) of this gift letter, I/We hereby certify that any funds given to the homebuyer were not made available to the donor from any person or entity with an interest in the sale of the property including the seller, real estate agent, broker, builder, or loan officer, or any other entity associated with this transaction.
Mark Pfeiffer
Branch Manager
Loan Officer, NMLS # 729612
972.829.8639
mpfeiffer@homebridge.com