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Converting “Cash” to Down Payment Funds – Gifts

We frequently have borrowers with substantial sums of cash that they want to use for a down payment. They cannot simply deposit the funds in escrow or into their bank accounts b/c lenders will want to know where the money came from. Lenders prohibit the use of un-sourced and unseasoned funds in all transactions.

Buyers with cash need to find a donor or “gifter” willing to “gift” a similar amount. The donors should always gift the funds straight to escrow b/c the paper-trail requirements are so much simpler.

For conventional transactions, if donors gift the funds straight to escrow, the only paper-trail that is required is a simple gift-letter and a copy of the gift check. No bank statements or proof of funds are/is required.

If gift funds go into a buyer’s bank account (instead of escrow), lenders then want to see the donor’s bank statements. This often creates problems.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 335646