Who can give
Rules vary by loan type, but these are the general patterns. Confirm the details for your loan with your loan consultant.
- Conventional: usually relatives, a fiancé or domestic partner; some loans also require a small contribution from your own funds
- FHA: relatives, employers, close friends with a documented relationship and some charities or government programs
- VA: most donors are allowed, as long as they aren't an interested party in the sale
What a gift letter includes
Your lender will usually give you a form. It typically asks for:
- The donor's name, address, phone number and relationship to you
- The gift amount and the date of transfer
- A statement that no repayment is expected
- The property address
- Signatures from the donor and the buyer
Proof of the transfer
Along with the letter, lenders want to follow the money. That may mean a copy of the check or wire, your bank statement showing the deposit and sometimes the donor's statement showing the funds left their account.
Have the gift deposited early and keep the records. Large deposits that aren't explained can slow down approval.
Gifts at closing
Donors can often wire funds directly to the settlement agent instead of to you. The lender still needs the gift letter and proof of the transfer. Before anyone wires money, confirm the settlement agent's instructions by phone using a number you trust.
Taxes for the donor
The donor, not you, deals with any gift tax. Gifts up to the federal annual exclusion per recipient generally don't need any filing. Larger gifts usually need a gift tax return, but tax is rarely owed because of the lifetime exemption. The annual figure changes over time, so the donor should check with a tax professional.
Can the seller give a gift?
No. Sellers, agents and builders are interested parties, so their money can't count as a gift. They can offer seller concessions toward your closing costs within the limits of your loan program. With CapCenter's ZERO Closing Costs (restrictions apply), you may need less cash at closing to begin with, though escrow deposits and prepaid interest aren't covered.
