I got this message from a reader here on Activerain, and thought I'd share the answer.

Subject: FHA Gift Money (Sent via Activerain)

Dan, My wife and I are in the process of buying a house. During the FHA preapproval process we noticed that we possibly were going to need a little help monitarily. Mywife's parents were more than happy to help us out. The only catch and this is my problem, is that the money that they gave us was cash and is considered "matress money," as it was never in the bank. We have filled out a gift letter, but our lender is stating that we are going to need more proof of the origionation of the funds. It is only $2400. Is there anything that you can suggest that may help us?

Thank you, 

A reader

Here is my response:

Hi, reader,

Thanks for your email.

There are 3 basic requirements of gifts for FHA loans:

1. Giver must verify ability to give funds (bank statement, etc.)
2. Gift letter must show money is given as gift
3. Receiver must verify receipt of funds (bank statement)

It sounds like you’re getting tripped up on #1, but the rest are ok. It’s not necessary that the actual money given be money in a bank, if the givers have other funds in the bank they’d be able to show as available to give. For example, if her parents have $2400 in the bank and $2400 in mattress money, they could show the bank money as proof of the source of funds. Whether they give you the money from the bank, or the money from the mattress makes no difference. Is that a possibility?

Alternately, you might look to have someone else act as the giver if they are able to show those funds available, and are willing to sign the gift form. Take a moment to consider if you have other relatives or friends who may be able to act in that capacity.

If you have questions for Dan Hartman, please contact me through my profile page, or leave a comment here. Thanks again for reading!