When it comes to qualifying for a mortgage, using gift funds is a source of confusion for borrowers. When are gift funds OK, and when are they a no-go? Does the borrower need to kick in a portion of their own funds in addition to a gift? If you need a mortgage in Pennsylvania, MortgageDepot has your answers to these top borrower questions.
Scenario #1: Purchasing a Single-Family Home as Your Primary Residence
In many cases, if you come to MortgageDepot seeking a home loan, all of your down payment and closing costs can be gifted to you. This situation applies to single-family homes used as the borrower’s primary residence. Simple home-buying transactions usually fall under this category.
Scenario #2: Purchasing a Primary Two- To Four-Unit Residence
If you need a home loan to purchase a two- to four-unit residence that you plan to live in, you’ll need to front some of your own funds. Here are the details:
The borrower must contribute a minimum of 5% of their own funds before using gifted funds to purchase the residence.
This 5% figure does not include the required six months of PITI reserves.
Using Gifted Money to Fund Your Down Payment
When you’re purchasing real estate, gifts are always appreciated! To use them successfully, you must be detail-oriented in your documentation. If someone is kind enough to give you a financial boost, their gift letter must include:
The specific dollar amount of the gift.
The date that you received the funds.
A statement from the donor indicating that you don’t need to repay the funds.
The donor’s contact information and relationship to the borrower.
There are additional documentation requirements if a domestic partner is contributing gifted funds to the down payment. The borrower must also produce proof that the gift has arrived in their bank account.
Contact MortgageDepot Today!
If you receive a gift to buy a home in Pennsylvania, use it wisely! Contact MortgageDepot today for more specifics on how to effectively use gifted funds for your real estate purchase.