Most people look forward to the big moments in their lives–getting married, starting a family, and buying a house come to mind immediately.  For many of us, those life events come with gifts from friends and family members to help us along our life’s journey.  Sometimes they can be substantial, and perhaps you can use your gift money towards the down payment of your new home.  Here’s how:

Tale of the Tape: Track Your Gift

Gift money can generally be used for virtually any mortgage product to a certain degree, but the most important thing to bear in mind is that it must be trackable and traceable for your lender.  Transparency in gift funds is key for getting through the underwriting process of your mortgage.

With that said, if you intend on using any gift money for your down payment, make sure to have adequate documentation.  Generally speaking, this includes some form of document with the names of both you and the giver along with their information and where the funds came from.  Your lender will also likely require bank statements showing the transaction from the giver as well as how it was acquired.

How Much Gift Money Can I Use for a Down Payment?

While guidelines vary between loan products, there are some general guidelines for whether or not you can use gift money and how much gift money you can use for your down payment.  These aren’t 100% set in stone, so it’s important to communicate with your lender about possible changes. If you’re purchasing a single-family home as your primary residence, then you can use gift money without making any contributions of your own.

Underwriting

The essence of loan underwriting is to assess the risk of a potential loan and ever since the market crash, underwriting is serious business for lenders.  With that said, it’s super important for you as a borrower to do everything in your power to make the underwriting process seamless and smooth, especially when it comes to gift money.

As we’ve already stated, have your documentation ready.  Additionally, your lender will require at least two months of financial statements which means that you should have any financial statements reflecting your gift money available.  Substantial deposits (generally 50% or more of your monthly income) are likely to be scrutinized by an underwriter, so be prepared to track that information.

Get the Mortgage You Need

Part of the loan process is getting pre-qualified for a mortgage and getting on your way to shopping for and/or buying your new home.  Tidewater Mortgage Services, Inc. has made this process super simple and easy with our online application and 20+ years of experience in the industry.  Apply online, and our loan officers will get in touch with you to help decide what the best mortgage product is for you and your family.  Start today!