Steps for Family Down Payment Gifts

When it comes to a new mortgage loan, the down payment amount is often the largest financial concern for many buyers. This lump sum, paid up front as a percentage of the principal loan amount, can be a struggle for many buyers to come up with all at once.

At City Creek Mortgage, we’re here to help. Did you know that most common loan types allow you to receive a gift from a parent or family member that can be put toward your down payment, all without raising your mortgage rate? Let’s go over the steps to making this happen.

Talk to Lender

Firstly, speak to a mortgage officer about the programs that allow down payment gifts, which include conventional programs and FHA loans. There may be a few minor differences when it comes to sources of funds, how long the money needs to be in your account, and other details. Just have a basic conversation to ensure you’re on the right track.

Gift and Gift Letter

Once you’re sure you’re on track, your parent or other family member provides the gift money. It’s best to deposit this into your bank account as soon as possible – mortgage underwriters want to see copies of bank statements that show the funds, so the sooner the better. Deposit verification requirements will vary between lenders, and between types of loans.

At the same time, the person providing you with the gift must also send along a letter that specifically confirms the status of this money as a gift. They must state that they expect no repayment on this money – the deal can’t happen otherwise.

Underwriter Verification

From here, a third-party underwriter who is involved to check on various financial aspects of the transaction will verify your down payment funds. They’ll look at bank statements for how much money you have in the bank and how long it’s been there. Generally, as long as the funds have been in your account for at least a month, you’ll be fine.

Deal Closes

Once your funds have been verified by an underwriter, the rest of the deal proceeds as it normally would. You’ll get the home appraised, the underwriter will finish his or her full review, and you’ll move to closing on the loan.

For more on down payment gifts, or to learn about any of our mortgage services, speak to the pros at City Creek Mortgage today.


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