If you’re ready to become a Utah homeowner and you happen to receive a monetary gift, can you use the cash for a home loan down payment?
Quite possibly, the answer to this question could be yes – but certain requirements must be met to use gift money for a home purchase. For answers to your questions about who can provide the funds, how much they can give toward a home loan down payment and the documentation mortgage lenders need, take a look at the following.
Acceptable Sources for Gift Funds
You can expect mortgage lenders to look at where your monetary gift came from, and depending on the type of home loan you’re seeking, there are stipulations on who the donor of your down payment can be:
- With a conventional mortgage, gift funds must come from a family member – a parent, sibling, child, cousin or anyone else related by blood, adoption, marriage or legal guardianship.
- With an FHA loan, gifts from related individuals are acceptable, as are funds gifted by employers and labor unions and monetary assistance from government agencies and public entities.
- With VA financing, cash for a down payment can come from just about anywhere – the only stipulation is that a gift cannot come from anyone who has a vested interest in the home loan or property sale.
Down Payments and Gift Amounts
Is there a limit to the amount of cash someone else can provide for your home loan down payment?
Whether you choose a conventional mortgage, an FHA loan or a VA loan, you can typically use a gift to cover the entire amount. However, in some situations, borrowers may need to contribute a portion of the funds. This could be the case if, for example, you take out a conventional home loan and put down less than 20 percent or use conventional financing for the purchase of investment property.
Mortgage Lenders Require Gift Letters
If someone gives you a money to be used toward a Utah home purchase, you’ll need to submit a gift letter to your mortgage lender. Essentially, the document must establish that the funds are being gifted and don’t need to be repaid.
Lenders often provide a gift letter template, but you can ask the donor of the cash to prepare a document that includes their contact information, their relationship to you, their banking information, the amount of gifted funds and the date they were received. The letter must clearly state that the money is a gift, and both of your signatures are required.
Have questions? The mortgage professionals at Intercap Lending, serving northern Utah, can provide you with answers and expert advice on funding your home loan down payment. Contact our Orem office today!