The Lakeland mortgage scene has really tightened up of late. Underwriting has become much more strict, and borrowers are having to come up with larger downpayments. As such, I’ve noticed an increasing number of Lakeland real estate buyers looking to family members to assist with downpayment and closing cost requirements.
If you’re fortunate enough to have an immediate family member (parent, grandparent, etc.) willing to help you out, then consider yourself blessed! However, you need to be sure you do things correctly, or your downpayment gift may not be allowable.
Read on to find out what the rules are so you don’t get bit.
The Right Way to Receive Lakeland Mortgage Gift Funds
If gift funds from a family member are in the cards for you as you move forward with your Lakeland real estate purchase, you should be aware that you can’t just deposit the money in your bank account.
Here are the 3 main things to do when receiving Lakeland mortgage gift funds:
- Complete and sign an acceptable gift letter
- Document the gifter’s (your family member) withdrawal of funds with teller receipts
- Document the giftee’s (you, the borrower) deposit of funds with teller receipts
Follow this recipe, and you should be good to go. As you can see, Lakeland mortgage lenders pay close scrutiny to downpayment gift funds and how they are managed, and with good reason.
First, lenders today are fending off increasing acts of mortgage fraud – so they need to be sure that the funds in question are “clean” (i.e. not laundered). Second, lenders must be certain that the gift in question is in fact a gift and not a loan in disguise. This is where the “gift letter” comes into play.
Lenders nearly always require your family member (the gifter) to produce a signed, dated letter affirming that the money they give you, the borrower (or giftee), is in fact a gift and not a loan.
Here is some sample language you can use for the gift letter:
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]
A Note on Gift Fund Tax Liability
It’s also worth noting that gifting funds between family members can create both legal and tax liabilities. If you’re not certain about how donating or receiving a gift may impact you and your Lakeland Real Estate purchase, call or email me directly. If I can’t help you with your questions, I can refer you to somebody that can.
