A client came to us this week looking to buy a $500,000 house with a $100,000 down payment from her boyfriend (who won’t be on the loan). She was going to deposit the money so it would be “seasoned” by the time she went into contract.
We said “stop”. First, it will take way too long to “season” that money. As long as the $100,000 deposit is on any of the bank statements that we must provide, we will have to “explain it”. So, there is no reason to move the funds now.
Second, with Conventional Financing, as long as the “gift” is 20% of the purchase price or more, the buyer does not need any “seasoned” down payment money. So the donor/boyfriend should just deposit the money directly into escrow, and then provide a gift letter.
NOTE: If a donor “gives” less than 20% of the purchase price, the conventional buyers must have at least 5% of the purchase price “seasoned” as their own money.
FINAL NOTE regarding Gifts for Conventional Loans: The Gift Funds do NOT need to be “sourced”, meaning the donors funds can pretty much come from anywhere.
Founder/Broker | JVM Lending
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