What Are Gift Funds?
Welcome to Mortgage 101. We help home buyers and realtors understand home loans. You’re in the right place if you’re thinking of buying your first home, if you’re moving to your next home, or if you’re ready to refinance your existing loan.
Gift Funds are any type of asset that is gifted to you in the home buying process.
It can be in the form of cash or equity, given to you by a relative or friend.
Gift funds are a great alternative for anyone that doesn’t have enough money already saved up for a downpayment or closing costs.
Who Can Give Gift Funds?
So, if your mom and dad, aunt and uncle, grandma and grandpa want to help you purchase a home, you are able to receive funds from them in the form of a gift.
According to hud.gov that list includes:
- the borrower’s relative
- the borrower’s employer or labor union
- a close friend with a clearly defined and documented interest in the borrower
- a charitable organization
- a governmental agency or public entity that has a program providing home ownership assistance to
- low or moderate income families; or
- first-time homebuyers
This must be a true gift. Your lender will need you to show that there is no obligation for you to repay the gift. The simplest way to do that is with a signed gift letter. You will also need to show where the funds came from and that the funds are now in your account.
- Signed gift letter.
- Statement showing where funds came from.
- Statement showing that funds are now in your account.