When The Down Payment Is a Gift

When getting ready to buy your first home, a down payment can get in the way of making things happen.

One of the great features of a FHA loan is being able to have a family member or a close relative gift you the FULL 3.5% down payment required by the program. But to make sure your transaction goes smooth and there are no "surprises", it's very important to understand how gifted down payment works.

First, make sure the person who will be gifting you the money is a family member or a close relative. Gifts from non-family members are generally not acceptable unless your can document a close past relationship. In other words, you friends or co-workers may not work.

Second, the bank will require proof of "ability to gift" meaning, whoever is gifting you the down payment will need to provide recent bank statements to show they do have the funds (just like a bank would ask YOU if you're bringing your own funds to close). So make sure that person knows what to expect. It will help the transaction go smoother.

Third, the bank will also supply you with a form called "Gift Letter". This letter will state the relationship between the parties, the property address and the amount of the gift. The gift letter clearly states that the funds are a gift and not required to be repaid. You and the person providing the gift will be required to sign the letter.

Last but not least, you'll need to provide proof that funds came out of that person's (who is gifting) account and deposited in to yours. Keep all the transfer receipts and statements.

If you have any questions on gifted down payment or on mortgages in the Sacramento and surrounding areas, please don't hesitate to contact me.

To Your Success -

Maria