In most cases, lenders will allow borrowers to come to the table with money that came to them in the form of gifts. But be careful how you accept the money and where you stash it.
Sean Young, a loan officer with FirstCal Colorado in Greenwood Village, says that if you fail to accept the gift in a "lender-friendly" way, the underwriter could just as easily not allow it.
The wrong way is to deposit the cash directly into your bank account. Rather, open a new account and follow a series of steps, keeping detailed records of each move.
Here are Young's six steps to success with down-payment gift funds:
1. Provide an acceptable gift letter signed by all parties. Typically, your loan officer will provide the proper letter. You just have to get it signed. But if not, the letter should read like this:
"I am the (relationship to recipient) of (name of recipient) and this letter serves as evidence that I am gifting (name of recipient) (amount of gift) to be used for the purchase of the home at (complete address of property). This is a gift, not a loan, and there is no expectation of repayment. Signed, (signature of gifter)"
2. Provide a bank statement from the gifter's account to show proof of funds.
3. Provide documentation of the gifter's withdrawal of funds via teller receipts in the exact amount of the gift, stamped and signed by the teller.
If the gifter is wiring you the money, provide a copy of the wire transaction. If the gift is in the form of a check or money order, provide a copy of it and then an updated statement after the check has cleared the account.
4. Provide documentation of your deposit of the funds into your new account via teller receipts in the exact amount of the gift, again stamped and signed by the teller.
Make sure that gifted funds are not commingled with other funds at the time of deposit. For example, if the gift is for $10,000, the bank's deposit slip should indicate that a $10,000 deposit was made, nothing more, nothing less. Don't add a random deposit to the transaction. So if you are depositing an additional $100, it should be in a separate deposit.
5. Provide a new bank statement showing the deposit and updated balance, making sure the statement goes back to the date of the last statement you provided the lender to cover any gaps.
6. Be certain all your statements show your name, at least the last four digits of the account number, the bank's name and balance.
Any time you get a statement from a bank teller, be sure it is stamped by the teller and dated. If you print statements online, make sure the statement shows the URL.
Detailed? Yes. Cumbersome? You bet. But absolutely necessary, Young says.
Lenders want to make sure of two things, the Colorado loan officer explains. First, they want to make sure that the cash gift is "clean," rather than laundered, money. And second, they want to make sure the gift is really a gift, and not a loan in disguise.
The Housing Scene erred in a recent column on the VA loan program. Anywhere in the country, a veteran can borrow up to $417,000 without any money out of his or her own pocket -- much more than the $144,000 we mistakenly reported earlier. But there are 46 counties, largely on the east and west coasts, where the maximum is considerably higher. For every $4 borrowed above the max, however, the vet must put up $1.