From the Bank of Mom & Dad

Some loan programs allow for the down payment to be 100% gift money!

You’re looking to buy a home, but the down payment and closing costs are a bit more than what you have saved. The most common way that first-time home buyers make up the difference between what they have and what they need? Mom and Dad to the rescue! Many first-time home buyers turn to the Bank of Mom & Dad for more support when they need extra money to cover closing costs or the rest of a down payment.

Many mortgage lenders give borrowers the option to use gift money for mortgages from a family member as a portion, or even all, of the down payment! Some of our loan programs even allow for the down payment to be 100% gift money from a relative or employer.

If you’re using gift money for your down payment, you’ll need the donor to write a gift letter to your mortgage company that makes it clear that the money is a gift! Your lender can provide you with this letter and walk you through the necessary steps. If the gift funds have been verified in your account, you’ll need a matching bank statement showing the withdrawal and deposit. If the gift funds are not verified in your account, you’ll need a certified check. Although gift funds are great for closing costs and down payments, one thing to remember is that your lender may ask to see “reserves” – or assets that you do not plan to use towards the purchase of your home, but could be used to pay your monthly mortgage if necessary. Depending on the loan program, these reserves, in theory, cannot come from gift money during the mortgage process and should be money you added to your bank account two months or more before you begin the pre-approval process.

Gift funds are helping to bridge the gap between your savings and the amount needed to afford a home. Let’s be honest, we all would love a little help in the home buying process, but don’t forget to also provide your parents with extra proof of your appreciation!