A gift for a down payment using Washington State FHA Financing may come from sources such as: family members, close friend, the borrower’s employer or a charitable organization such as a church. With that said, HUD clearly states that these funds must be completely documented (paper trail from source) and the donor must agree in writing (gift letter) that no repayment is required.
Follow These Guidelines To A “T”. Accepting money for a down payment is a 3-Step Process:
First – Get A Down Payment Gift Letter
A certified Down Payment Gift Letter is required by FHA, VA and USDA underwriting guidelines. The Gift Letter must contain,
(1) The amount of gift
(2) The donor’s name
(3) The subject property address
(4) Verbiage indicating the gift is NOT loan, and needs not repaid
(5) Signatures and dates from both donor and recipient
Next – Receive Money From Donor
The donor (gifter) needs to make a clear paper trail documenting where the money came from and the form in which it will be transferred to the recipient. Make sure you follow these steps to a “T”:
(1) Provide a bank statement showing the donor has the funds available
(2) Provide a copy of the check or wire transfer (money order or check is the best option)
(3) The gift much match the amount on the gift letter
Lastly – Depositing the Gift Funds
It is important to remember that when you deposit the gift funds to follow these three steps:
(1) Do not commingle the funds, meaning: If you receive a gift of $6,000, only deposit $6,000 at that time
(2) After the deposit is made, request a copy of the check from the teller
(3) And, finally, after the deposit is made, request an update account balance statement reflecting the deposit
If you follow the above-mentioned steps to a “T” you can avoid costly hang-ups in underwriting. If you would like a copy of the Gift Funds Checklist along with a certified Gift Letter, you can click on the link below or call me directly at (425) 350-7136.
Another common way that home buyers are using gift funds for down payment assistance is through a 401k loan. Using a 401k loan to purchase a home is becoming more and more common as a result of poorly performing investment accounts. Typically, there are minimal fees or costs to take out a loan against a 401k, and if you plan on keeping the home for more than 5 years, often times that is a good option.
I can be reached directly or via text message at (425) 350-7136. You may also e-mail me at firstname.lastname@example.org