We are getting frequent questions with respect to GIFT FUNDS. For a Conventional (Non-FHA) Purchase, Gift Funds do not need to be seasoned, and it is best if the Gifting Party does not gift the funds to the buyer; it is best from a paper trail and underwriting perspective if the Gifting Party writes a check directly to Escrow.
For a Conventional Purchase, the Down Payment can consist entirely of Gift Funds if the loan-to-value is 80% or less (or if the Down Payment is 20% or more). If, the Down Payment is less than 20%, then at least 5% of the purchase price needs to come from the buyer’s own seasoned funds. Typically, for a Conventional Purchase, the Gifting Party does NOT need to provide asset statements to prove the “ability to gift”.
For an FHA Purchase, all or part of the Down Payment can be a gift. The buyer does not need any of his or her own funds to go towards the Down Payment. Again, we recommend that the Gifting Party write a check directly to Escrow. With FHA, however, lenders typically require asset statements from the Gifting Party to prove that the Gifting Party has/had the ability to gift the funds. The Gifting Party must have enough seasoned assets to cover the gift.
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167