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How Down Payment Gifts Work

Real estate agent holding house keys

Confident real estate agent holding your new house keys and smiling at camera

For many people, the most stressful or worrisome part of mortgage loans is the down payment. A standard home loan will come with a down payment requirement that may be up to 20 percent of the principal loan amount, and this can be a large sum for many buyers to raise.

At Primary Residential Mortgage, we’re here to help. Did you know that in most situations, it’s okay for you to get help with your down payment via a gift from parents or other family members? The rules here vary slightly between loan formats, but this is generally true across the board. Let’s look at the steps you have to follow if you’re going to do this.

Speak to a Mortgage Loan Officer

Firstly, speak to a mortgage loan officer and confirm that the loan program you’re shooting for works with this kind of down payment gift. Also, ensure that you’re on top of any specific guidelines you have to follow for a particular loan type.

Money is Provided

From here, your parents or another third party who is helping you out can provide you with the funds to put in your bank account. It’s best to get this money deposited right away – underwriters want to see copies of the bank statements that show when the deposit was made. Specific verification methods will vary between lenders and the type of loan used.

Gift Letter

In an important next step, the third party must also provide written documentation to show that they do not expect any formal repayment. This is to ensure that the funds being used are truly a gift and not some type of loan meant to circumvent the normal rules.

Underwriter Verifies Funds

Next, a third party underwriter will verify the down payment funds. They will look at bank statements and potentially at the sources of your funds. If the funds have been in your account for at least a month and can be easily traced back, you’ll have no issues.

For more on How Down Payment Gifts Work , or to learn about any of our mortgage services, speak to the pros at Primary Residential Mortgage Contact Us today.

PRMI NMLS 3094. PRMI is an Equal Housing Lender. Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. Programs, rates, terms, and conditions are subject to change and are subject to borrower(s) qualification. This is not a commitment to lend. Florida Office of Financial Regulation MLD646. Opinions expressed are solely my own and do not express the views of my employer.

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