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RE: Gift Funds

The Rules for Using Gift Funds

You're ready to buy a home and Mom and Dad have decided to help you out with the down payment! WOOHOO! BEST PARENTS EVER! But before you proceed, you need to make sure you understand the rules for down payment "gifts".


- Unless you've had the funds in your own account for a few months (called seasoned funds), you'll need to document where the funds are coming from.

- Documentation needed: A gift letter (stating to/from relationship, amount, date, and that it is a gift vs a loan), a record of the deposit, and bank statements to show where the money came from and where it went.

- Parents may also need additional documentation if they sold stocks or other assets to provide the payment.

- Friends and other family members can also gift you funds but make sure it's truly a gift and not a loan. If the intent is to pay it back at some point, that is mortgage fraud and illegal.

- How much can be gifted? Parents can gift $30k per child and anything above that amount would incur a gift tax. Other friends/family members can gift $15k before incurring the gift tax. Also, the amount the buyer is required to provide from their own funds depends on if the home is going to be their primary residence or an investment property. Typically with investment properties, the buyer must provide more of their own funds and cannot use as much from gift funds.

- A lot of the specific details pertain to the specific buyer(s) so it's always best to talk with your Mortgage Loan Officer about your exact situation.

If you're thinking about buying or selling a home and have questions on these details, please call me! I'm always happy to help!! In addition, I work very closely with quite a few incredible mortgage companies such as Academy Mortgage, who created the video below on this topic, and I can help put you in touch with a wonderful lender!

- Kylie


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