The Low Down on Gift Funds

November 16, 2015 — 2 min read

Gift Funds for Mortgage

First-time homebuyers needing help with their down payment often find it in the form of gift or grant funds. Many loan programs allow for 100 percent gift funds, requiring little-to-no borrower contribution of their own funds. Just like a borrower's income needs to be verified, so do any gift funds used to finance a home. There are certain regulations that need to be followed any time a borrower receives a gift, and each loan program has its own stipulations. Acceptable gift fund donors include:

A borrower's relative
A domestic partner
A borrower's employer or labor union
A charitable organization
A homeownership assistance program that supports low and moderate-income families and first-time homebuyers

Lenders require a paper trail of funds and a signed gift letter by the donor and borrower containing the following information:

The donor's relationship to the borrower
The donor's name, address and phone number
The dollar amount of the gift
A statement that funds are considered a gift with no implied repayment to the donor by the borrower
Proof the gift is the donor's own funds
Documentation of funds transferred to the borrower and receipt of funds by borrower

Here are some general guidelines for eligible gift funds and grant funds as a down payment source: