Profile picture for Al Dave

For a conventional loan, can you use a gift for coming up with the 5% downpayment?

I am hearing two different things. My loan officer who gave preapproval letter says yes it is ok. However, a talked to a broker he says it is impossible, anyone saying this does not know what he is talking about and once you start the loan process your application will be denied. Please advice. I have a good income with okay credit score. First term home buyer, but does not qualify for FHA loans due to income limit.
  • July 19 2011 - Columbus
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Answers (4)

Conventional loans require a borrower to provide 5% of their own funds, sourced and seasoned (evidence of where it came from and in their accounts).

FHA allows for all gift purchase.  There are no income limitations on FHA loans.

@Elena,  I absolutely do not recommend a borrower mover gift funds into their account prior to talking with me or another lender.  If the underwriter requires the funds to be sourced and seasoned it becomes a vitual nightmare to try to go back and recreate the paper trail to meet industry guidelines.  Of course, the gift received last year would be considered sourced and seasoned and would not be subject to the same requirements of a gift.

I would get clarification from your mortgage consultant to be sure you are understanding the situation.  If, however, it is exactly as you have written then I agree with the broker.  
  • July 19 2011
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FHA income limits is news to me. Most lenders allow gift funds, but they also require that 5% of the down payment must come from the borrower's own funds.

Happy funding, Rudi
  • July 19 2011
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Profile picture for Michael Helton
1)  You Broker is not a lawyer, nor are they a lender.  If your lender says you may do it, then I would tend to believe it can be done.  However, by pre-approval do you mean that you sat down with the lender and went through all of your numbers and credit reports?

2)  Regardless or what the Realtor/broker tells you, I would suggest discussing the tax consequences for you and the Giftor with an accountant.  The last thing you want is to accept the gift grom granny and have the IRS audit her and take her to jail!
  • July 19 2011
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Profile picture for kapyarets

Hi,

You can use a gift but you need to have a letter that will clearly stated that this money is a gift and you don't have to pay it back with a signature and date. Better to have it in your account at list for 3 month before you starting the process. Different lenders treat these gifts differently. If your mortgage person is well experienced, listen to him/her. You need to work with broker you trust.

  • July 19 2011
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