Florida mortgage lenders have really tightened things up of late, and on top of stricter underwriting requirements, borrowers are having to pony up more and more to cover downpayment costs. Interestingly, the change has led to a huge uptick in buyers who receive gifts of cash from family members. This is great news!
However, borrowers who fail to follow some basic but very important rules about gift funds usage will be in for a sorry surprise. What are the rules? Read on.
How to Receive Gift Funds for Your Florida Mortgage
If you are planning to use gift funds from a family member to help with your Florida mortgage downpayment, you should know that you can’t just deposit the money in your bank account.
There is a certain protocol that needs to be followed when you accept a cash gift, and it includes these 3 distinct steps:
- Complete and sign an acceptable gift letter
- Document the gifter’s (your family member) withdrawal of funds with teller receipts
- Document the giftee’s (you, the borrower) deposit of funds with teller receipts
See, Florida mortgage lenders give very close scrutiny to gifts-for-downpayments. For one, mortgage lenders have to be certain that downpayment cash is “clean” (i.e. not laundered). Secondly, lenders want to be sure that the gift really is a gift and not a loan incognito. This is where the “gift letter” comes into play.
Lenders nearly always require your family member (the gifter) to produce a signed, dated letter affirming that the money they give you, the borrower (or giftee), is in fact a gift and not a loan.
As an example:
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]
Important: Don’t Commingle (Mix) Your Gift Funds with Other Money
I recommend that you take an additional step to make your underwriter happy. And let’s face it. Happy underwriters get loans funded.
In addition to getting the gift letter signed, be sure that you keep the gift funds you receive in a separate bank account with no other money in it. If you have to open a new account at your bank, fine. It takes no time at all, and hey – you might even get a Free toaster or microwave (score!).
Also, if the gift is for $12,000, for example, the bank’s deposit slip should indicate that a $12,000 deposit was made — nothing more, nothing less.
Don’t add a random $50 check to the deposit, in other words. If you have a separate deposit to make, make it as a subsequent transaction with its own receipt.
It’s also worth noting that gifting funds between family members can create both legal and tax liabilities. If you’re not certain about how donating or receiving a gift may impact you, call or email me directly. If I can’t help you with your questions, I can refer you to somebody that can.
I hope you found this post useful! As always, if you or anyone you know is in need of a local Florida mortgage broker, I’m your guy. Call me at 863-604-3019 or apply online for your Florida mortgage. We’ll keep you posted and let you know when it’s time to pull the trigger!
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Great information and by the way thnks for visiting my blog.
This is really good advice and I’m going to pass it on to my prospecdtive clients
I never realized that items given as “gifts” had any bearing on taxes. Thanks for the info.
This information is both useful and important. From time to time, I have a clinet where the status of the gift monies has become confused and it led to delays in closing the sale.
There have been a lot of “gifting” going on as the first-time buyer tax credit program rolled out. Thanks for the helpful info.