Buying a Home with Gifted Money: What You Need to Know

Buying a Home with Gifted Money: What You Need to Know

Thinking about buying a home and using money from a family member to cover the down payment or closing costs? You’re not alone – gifted funds are one of the most common ways today’s buyers get into the market, especially first-time homebuyers. But before you start house-hunting, there are important rules you need to follow to make sure your mortgage process goes smoothly.

What Counts as Gifted Money?

Gifted money is any sum of money given to you — typically from parents, grandparents, or close relatives – to help you with the down payment or closing costs on your new home. Lenders allow this, but they want to be sure it’s truly a gift, not a loan that would add to your debt.

Lender Requirements for Gifted Funds

Most mortgage programs (conventional, FHA, VA) have similar rules for using gift funds:

• Gift Letter: Your lender will require a signed gift letter from the donor stating the amount, the donor’s relationship to you, and that repayment is not expected.

• Source of Funds: The lender may ask for bank statements or proof that the donor had the funds available.

• Documented Transfer: You’ll need to show a paper trail – from the donor’s account to yours – so the lender can verify where the money came from.

Common Mistakes to Avoid

• Depositing Cash Without Documentation: Lenders can’t verify cash, so always transfer funds via check, wire, or electronic transfer.

• Not Telling Your Lender Early: Your lender should know about the gift before underwriting begins to avoid delays.

• Mixing Gift Funds with Personal Savings Without Proof: Keep clear records of when and how the gift was transferred.

Pro Tip from a Realtor

As an experienced real estate agent, I’ve seen transactions get delayed simply because gift funds weren’t properly documented. Getting this step right up front can save you stress – and keep your closing date on track.

Ready to Buy with Gift Funds?

Using gifted money can be a smart way to make homeownership possible, but planning ahead is key. If you’re thinking about buying a home this year and will be using a gift from family, let’s talk. I can connect you with trusted local lenders, guide you through the documentation process, and help you find the right home with confidence.

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