Follow These 6 Steps When Using Gift Funds

Mortgage and Lending with Home Loans by Sean Young - New American Funding NMLS: 191647

Follow These 6 Steps When Using Gift Funds


Follow These Steps When Using Gift Funds

 Gifts are allowed in most cases but the problem is, if you don’t accept the gift in a  “lender-friendly” way, the mortgage underwriter could reject it, and not allow it.

  Six Steps To Success With Your Down Payment Gift Funds

 You can’t just deposit a cash gift into your bank account. You have to follow a  series of steps and keep records.

  1.  Provide an acceptable gift letter signed by all parties. Provided by the lender.

  2.  Provide a bank statement from the gifter’s account to show proof of funds.

  3.  Provide documentation of the gifter’s withdrawal of funds via teller receipts in   the exact amount of the gift, stamped and signed by the teller.

  • If the gifter is sending a wire, provide a copy of the wire transaction.
  • If the gifter is providing a check or money order provide a copy of it and then     provide an updated statement after the check has cleared the account.


4.  Provide documentation of the giftee’s deposit of funds via teller receipts in the exact amount of the gift, stamped and signed by the teller.

5.  Provide a new statement showing the deposit and updated balance. Make sure the statement goes back from the date of your last statement you might have previously provided to cover any gap.

6.  Make sure all statements show name, at least the last four of the account number, bank name and balance.

  • Any time you get a statement from a bank teller make sure they always give you a teller stamp signed and dated.
  • Any time you print statements online make sure it includes the URL to show proof that it was from online.

Lenders require these 6 steps for two basic reasons.  First, they want to make sure that the cash gift is “clean” (i.e. not laundered).  Second, they want to make sure the gift is really a gift and not a loan-in-disguise. It’s why lenders typically require that the loan application be accompanied by a signed, dated letter. This will be provided by your lender for you to fill out.

For 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]

Keep The Cash Gift Funds Separate From Your Other Money

As an additional step, home buyers receiving cash gifts should make sure that gifted funds are not commingled at the time of deposit.

If the cash gift is for $10,000, therefore, the bank’s deposit slip should indicate that a $10,000 deposit was made — nothing more, nothing less. Don’t add a random $100 deposit to the transaction, in other words. The $100 deposit should be a separate transaction.

It’s also worth noting that gifting funds between family members can create both legal and tax liabilities.

If you’re unsure 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.

Sean Young


Posted by

Sean Young
Mortgage Loan Officer

Cell: 303.521.7169

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NMLS: 191647  / LMB: 100013240

MyLenderSean.comFirstCal Colorado Mortgage

Comments (49)

Ginny Gorman
RI Real Estate Services ~ 401-529-7849~ RI Waterfront Real Estate - North Kingstown, RI
Homes for Sale in Southern RI and beyond

Always good to explain the finer points of gift letters that cause angst for the buyers...thanks!

Aug 22, 2013 10:47 PM
Chris Jenkins-Sarasota Realtor
PalmerHouse Properties - Sarasota, FL
"Expect Success"

Excellent primer on the subject, Sean, thank you!  Bookmarked.

Aug 22, 2013 10:53 PM
Ron Aguilar
Continental Mortgage - Saint George, UT
Mortgage & Real Estate Advisor since 1995

paper trail this and always ask the Loan officer what the lender requires

Aug 22, 2013 11:29 PM
Sean Young
Home Loans by Sean Young - New American Funding - Highlands Ranch, CO
Colorado loan officer

Thank you Richie Alan Naggar

Thank you Betty from Team Honeycutt 

Raymond Denton that sounds like you had a lot of fun on that one. :)

I agree Amy Kilcoyne

You are welcome Bill Reddington and yes, it would be the same process if the gift was for closing costs.

You are welcome Inna Ivchenko

That's true William Feela, I still come across that every month.

Thanks  Shamansky, I see your kicking butt like usuall :)

Joan, normally lenders only require one to two months of bank statements depending on the loan program. If they deposited the wedding cash previous to the two months then it won't even be a factor. Lenders will always want to verify deposits (usually over $500.00) that show on bank statements that are not from the employers direct deposit. 

Yes, underwriters love paperwork Michelle Carr-Crowe. I always say it's easy to get a loan as long as you can document everything you say or do. :)

Your welcome Ginny Lacey Gorman

Thank you Chris Jenkins

Sounds about right to me Ron Aguilar

Aug 22, 2013 11:39 PM
Stu Dye

Great post...  Of particular note is the excellent advice:  DO NOT COMMINGLE THE GIFT MONEY!


Take care and Happy Friday!

Aug 22, 2013 11:43 PM
Anna Hatridge
R Gilliam Real Estate LLC - Farmington, MO
Missouri Realtor with R Gilliam Real Estate LLC

Thank you for a spelling out the details!

Aug 23, 2013 12:02 AM
Lyn Sims
RE/MAX Suburban - Schaumburg, IL
Schaumburg Real Estate

Gosh, it's unfortunately all so complicated for buyers .....

Aug 23, 2013 12:34 AM
Ben Yost - 303-587-4297
First Time Home Buyer, Mortgage Rates, Pre-Approval - Denver, CO
FHA, VA, Conventional - Mortgage Loans in De

Good Post Sean!

Congrats on the feature!

Not sure everone caught on to the cash part so let me help:

Never Ever Deposit Any Cash Into your Account When You ARE Buying A Home- Period End of Story!


Aug 23, 2013 12:43 AM
Sandra Newman
Golden Star Realty Incorporated, REALTORS® - Paw Paw, MI
Associate Broker, REALTOR, e-PRO, GRI

Great info. Thanks for sharing.

Aug 23, 2013 01:06 AM
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

The same can be said for selling an asset to a family member. I had a client who sold her motor home to a cousin - and she had to show proof that the cousin had transferred title and licensed the motor home. 

Aug 23, 2013 01:25 AM
Travis "the SOLD man" Parker; Broker/Owner
Travis Realty - Enterprise, AL
email: / cell: 334-494-7846

ALL are very logical steps and it's nice to now have a list of them. THANK YOU!

Aug 23, 2013 01:47 AM
Dora Griffin
D A Griffin Financial.LLC - Fort Thomas, KY
NMLS 6380

Informative Post! Every step is important; one misstep can be frustrating. The one thing I have the most trouble with in gift situations OR just the borrower's bank statement.... they don't include ALL the pages.  A summary does not work and unlike your statement above about the truncated account number my lenders usually want at least one bank statement that is the real McCoy, then the followups can be truncated and printed online as long as they have the name on them.

Very, very important borrowers get this stuff right! Great post!

Aug 23, 2013 02:14 AM
Sharon Parisi
United Real Estate Dallas - Dallas, TX
Dallas Homes

Sean, this is valuable information for Buyers.  Many people are not aware of these requirements. I'm going to re-blog this post for my readers.

Aug 23, 2013 03:15 AM
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

Good things to keep in mind.  Thanks for a great post.  I think this will become more relevant as the market slows and the first time buyers can get a foot in the door.

Aug 23, 2013 05:27 AM
Bob Miller
Keller Williams Cornerstone Realty - Ocala, FL
The Ocala Dream Team

Hi Sean, great post.  We did one for our daughter and it works well if you follow the steps!

Aug 23, 2013 05:29 AM
Kimo Jarrett
WikiWiki Realty - Huntington Beach, CA
Pro Lifestyle Solutions

Very informative, however, if a gift is going to be used, shouldn't the borrower get the specific details the lender requires first from the MLO. Isn't it true, that not all lenders require the same procedures, therefore, getting the information might save energy and time?

Aug 23, 2013 08:08 AM
Sean Young
Home Loans by Sean Young - New American Funding - Highlands Ranch, CO
Colorado loan officer

Thanks Stu Dye and I absolutly agree

Your welcome Anna Hatridge

I agree sometimes it can be too much Lyn Sims

Thanks Ben Yost and I think you said it best. :)

Thank you Sandra Leigh Newman

That's true Marte Cliff

Your welcome Travis Parker

Dora Griffen that is true for me too. 

Thank you Sharon Parisi I appreciate it

Thanks Gene Riemenschneider 

THanks Bob Miller and nice work

Thanks Kimo Jarrett and you are right, it is always a good idea to check with the loan officer first, the problem I see is that this is not covered up front and is usually something that is still in the works come conditional underwriting approval. 


Aug 23, 2013 03:30 PM
George P. Cruz Sr.
Premier Brokers International - Port St Lucie, FL

Great post thanks for for the steps..




Aug 23, 2013 09:46 PM
Rosie Moore
Serving Sugar Land, Richmond, Rosenberg, Missouri City - Sugar Land, TX

So far I haven't had a transaction that involved gift funds for a downpayment. This is very helpful information in case I come across this in the future. I know with FHA loans the entire down payment can come from gift funds. How about down payments for conventional loans? Can the entire amount come from gift funds too?

Aug 24, 2013 11:30 AM
Des & Spiro Kouridakis
Berkshire Hathaway HomeServices CA Properties - Yorba Linda, CA
- North Orange County Experts

Great List! Will keep this handy for when I come across this.

Oct 19, 2013 02:53 PM