What to Know About Down Payment Gifts

by Brad Gellman

A down payment gift is money that a buyer receives from someone else to use toward a down payment or closing costs during a home purchase.

I hope everyone had a wonderful Valentine’s Day! Since the spring market is about to start and people are getting ready to start buying homes again, I want to talk about different ways to help with the costs of financing a house. This month, we’re focusing on “Gift Money” when purchasing a home with a loan.

There are many rules and regulations when buying a home through a lender. For example, your lender needs to know the source of your down payment money. If you are considering giving or receiving any down payment assistance, here's a breakdown of common rules and requirements.

What Are Down Payment Gifts?

A down payment gift is money that a buyer receives from someone else to use toward a down payment or closing costs during a home purchase. Down payment gifts do not need to be paid back.

Gift Rules and Gift Letters

Different loan types have different restrictions on who can provide financial gifts, how those gifts can be used, and how they need to be documented. Regardless of loan type, most lenders require a gift letter that documents the details of who is gifting the money, what their relationship is to the buyer, and how much is being given. This letter also states that money does not need to be repaid and must be signed by the donor. Verification of sufficient funds and documentation of fund transfer is often required, as well.

Most loans are Conventional, FHA, and VA

Each one of these loan types have different rules and regulations for these gifts. If you are considering using a financial gift to purchase a home, speak with your lender about their gift rules before applying. If you haven’t spoken to a lender yet, please reach out as I have a few amazing Lenders that I highly recommend. Next month we are going to discuss some of the potential loan programs to help you save as much money as possible.

Baseball Season is almost here!

My favorite time of the year has almost arrived: pitchers and catchers reported to spring training on February 14th, and the first game of the season is March 28th in Philadelphia! I’m planning on being there, anyone else?

My Phillies schedule magnets just arrived and they will be mailed starting next week. If you would like one, please let me know and I’ll either mail it or we can meet up in person.

On May 21st, I am going to be giving away tickets to the Phillies game with a full tailgate before. This has been a great event the previous years and I’m excited to bring more people with me this year. If you’d like to go email me and I’ll put you into the raffle. I look forward to seeing you there!

Follow the Philadelphia Phillies here

Spring is right around the corner but don’t forget to enjoy the winter too. My family and I went on a few hikes and got out as much as possible. We’re definitely looking forward to warmer weather but this winter has been fun. Have a great rest of the month and I’ll see you in March!