If you are under the impression that all funds that are required to close on a loan are to be your own and in your accounts, then you would be mistaken. If you are in the market for an FHA Loan then it is possible for you to obtain a home and show your down payment and reserve funds were by gift funds. The 2016 FHA Guidelines On Gift Funds allow for a borrower to use gift funds for 100% of their purchase transaction. Now per the FHA Guidelines On Gift Funds you will have to abide by some strict rules in order for you to properly use these gift funds.
The main rule with gift funds is that they can be used only for down payments as well as closing costs. However, the main restrictions you need to pay attention to is that you cannot use these funds for reserves in order to fund your loan which includes the normal 1-3 months of reserves including principal, interest, taxes, and insurance otherwise known as P.I.T.I. If you are wondering what other options you may have for reserves if it is not possible to use gift funds, you can use the following sources: 401K Retirement Accounts, IRA Retirement Accounts, CD’s, Savings Accounts, and other Investment Accounts.
Even though you are perfectly in your rights per the FHA Guidelines On Gift Funds to use them, there are some scenarios where using these gift funds isn’t looked upon favorably. In some situations when you are using AUS or the Automated Underwriting System you may not be able to achieve an Approve/Eligible system finding. If this is the case, there are steps you can take in order for you to get the Approve/Eligible finding you desire. If it is possible for you to be added to the bank account where the gift funds came from and you can present a joint bank account with 2 months of statements, you can reclassify these gifts to funds of your own.
With this classification it should be able to satisfy the AUS. Another strategy in using gift funds is for you to deposit these funds far enough in advance to where they will be seasoned or in your account for at least 60 days. Doing so will ensure that this deposit will not show up in your most recent two months of statements and these funds are considered your own.
If you are getting gift funds for your home purchase per the FHA Guidelines On Gift Funds then you will need to fill out a gift letter that will be provided to you. This letter states that the gift funds and truly that, that there is no requirement to pay back the funds at any time. In addition to filling out this gift funds letter, then the donor of the funds will also need to provide 30 days of bank statements so that the gift funds can be sourced. Finally, you will supply the cashed check and corresponding documents from both parties banks to show the money leaving the donor’s account and depositing into the borrower’s account.
If FHA Guidelines On Gift Funds isn’t completely clear or you have additional questions regarding this, then please reach out to me at any time by call or text at 888-900-1020, email me at firstname.lastname@example.org, or fill out an application through my website at www.loanconsultants.org.