Cash Down Payment Gifts in Mortgage: How to Send or Receive It

Cash Down Payment Gifts in Mortgage

What Is the Procedure for Giving Cash Down Payment Gifts?

Today’s buyers usually give cash down payment gifts. Cash down payment gifts are most likely to be given to first-time homebuyers, but repeat and move-up buyers will also receive one.

Giving and receiving cash down payment gifts is easy. The key is to have the proper documentation and adhere to the existing procedures.

The following are the rules for gifting a down payment:

  • A formal gift letter must be used to register the gift
  • The gifted funds must leave a paper trail when they pass from the gift giver’s account to the homebuyer’s account.
  • The gift giver (donor) has no right to demand that they return the money.

Accepting a cash down payment gift is a three-step procedure.

Here is what you should do at each stage to ensure your lender approves your mortgage down payment gift.

Step 1: Compose the Gift Letter for the cash Down Payment Gift

The following are the essential details for your mortgage gift letter:

  • The gift’s monetary value
  • The date of the fund money 
  • The address of the property you’re buying
  • Relationship between the donor and the home buyer
  • Name, address, and phone number of the donor
  • Account details for the donor (where the money is coming from)
  • A note stating that the donation is a gift, not a loan and that you should not repay it.
  • The gift letter should be as short as possible and contain no “extra” material. Sign and date the letter with the signatures of both parties.

Step 2: Keep Track of Where the Gift Money Came From

Once you have written your mortgage down payment gift note, double-check that you have not broken any laws on accepting gifts. To do so, make sure to maintain a thorough paper trail for the money you are giving away.

After that, you will need to write a check to the homebuyer for the exact sum listed in the gift note. Make a photocopy of the statement. Please keep a copy of all your records and send one to the buyer; the lender may want to see it as part of the transaction.

A lender can log and monitor a personal check more quickly than a wire, which will help things go more smoothly at closing.

Step 3: Keep a Record of the Donation of Cash Down Payment Gifts.

The following measures must be taken now that the gifter has sent the buyer a down payment gift in the form of a check.

First, the buyer can physically step into their bank with the gift check in hand to make the deposit. Furthermore, make sure that the bank account into which you deposit your gift money is the same bank account from which you will withdraw all of your money at closing.

When you arrive at your branch, complete the following tasks:

  • Place the gift money in a bank account
  • Complete your transaction
  • Obtain a deposit receipt (deposit slip) as well as a bank statement detailing the deposit

Who Can Give Cash Down Payment Gifts on a House?

In most cases, any family member will contribute money toward cash down payment gifts. Parents, grandparents, siblings, infants, fiancés, and domestic partners are all included. Those who are related by marriage, adoption, or legal guardianship may also provide a down payment.

Maximum Amount of Money Required in Down Payment

There is no limit on the money that you can get as a gift for your down payment.

You will have to pay a portion of the cash down payment gifts out of pocket, depending on your chosen mortgage loan program and the type of home you are buying. 

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