The days of zero down mortgages are gone – other than VA loans and rural development loans. So if you don't have any money saved up, where can you get money for your down payment? Hopefully you have parents or grandparents (or other relatives) that can give you a gift for your down payment or part of it. However – make sure you can track the money!!
If you are doing an FHA mortgage, the rules are very specific – we have to be able to show that the person giving the gift has the ability to give the gift. So, underwriting guidelines are a gift letter, a bank statement showing that the donor (mom/dad/grandparents/etc) have the money in the account they are giving it from, a copy of the check – usually a bank check or cashiers check – and if you are depositing it in your account, a copy of the deposit slip. If the bank statement shows a large deposit, we will need your relative to show where that money came from. I just had a client that had cashed in a CD, so we got a copy of the CD and we were able to verify the transaction.
If the loan is a conventional loan, you still need a gift letter and the easiest way to transfer the money is to bring a cashiers check to closing from the donor. If you deposit the money into your account, you will need to get a copy of the cancelled check showing it cleared the donor's account. Most conventional loans require that you have at least 5% into the transaction of your own money, gift money can be the remainder of the down payment. If you are putting 20% down, the gift can be for the full 20%.
Most mortgage companies have a gift letter that they can give you to complete. If not, you need a letter that has the gift amount, property address, statement that it is a gift and not a loan and does not have to be paid back, relationship of donor and donee and the letter needs to be signed by both parties.
Let your loan officer know that you are getting a gift and they will make sure that you document the transfer correctly! Ask them if you have questions. The biggest question that I get is why do I have to get a bank statement, my parents have plenty of money or that their parents don't want to give a bank statement. Unfortuantely, FHA regulations require it as they want to know the money didn't come from the seller or someone else involved in the transaction.
Leslie Vanderwerf, Advisors Mortgage - lvanderwerf@advisorsmtg.com – Website
