Gift Funds Have Rules for California Home Loans

 

When qualifying for a California home loan gift funds and their rules are coming into play these days more often. A gift, when it comes to real estate lending is quite simple.  A gift is a sum of money that is given to a home loan applicant preferrabley by a blood relative, for the sole purposes of being applied toward aiding the applicant to qualify for a home loan.

The gift of funds is given to a the applicant with no strings attached.  It can not be a loan so it’s not to be repaid in any way shape or form.  The gift donor will sign a letter to this affect.  If the letter being written in any way insuates the gift is to be repaid, the funds will not be allowed to be used in conjunction with the California home loan.  In addition to the gift letter from the donor, expect the lender to ask the donor to show documentation that they had the funds in their possession for at least 30 days prior.

This documentation usually is in the form of the most recent asset statement ie..bank statement.  In no way can the gift funds be “mattress money”, which is cash stored at home rather than in an institution.  The lender will not allow these funds.

Gift funds can be used for a California home loan refinance, or a purchase loan.

Gift funds can be used for a variety of issues to help a home loan applicant qualify for a California home loan.  The gift funds can go tward increasing the applicants down payment, towards cash reserves, paying off debt, and toward closing costs for the loan.

All gifts are subject to the guidelines mentioned above and to individual lender guidelines.  Some California home loan programs may not allow gift funds so it’s essential you check with your Loan Originator first if you think you may need or have access to gift funds.

It is also vital that you do not deposit the funds into ANY of your liquid accounts until your Loan Originator says it’s ik. to do so.  These funds have certain rules attached to them that if aren’t followed will disallow the gift funds and their intended purposes.  Keep in mind sometimes lender guidelines don’t follow general common sense!

Gifts are a wonderful way of helping home loan applicants to qualify for a California home loan.  Make sure and work closely with your Loan Originator and follow the lender gift rules to the “T”, to ensure that the gift funds help rather than hurt the chances of securing a loan.

If you have any questions on gift funds or on anything regarding the California mortgage process, please click here and let me know your scenario.

 

Best

KW

 

 

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