Documenting Your Assets – Verifying Your Down Payment

Especially when buying a first home, some borrowers need help coming up with the down payment.  Family members are often a good source of assistance.  Mom, pop, grandparents, brothers, sister, aunts and uncles -- all are acceptable.  Gifts from non-family members are generally not acceptable unless you can document a close past relationship.  In other words, your friend or coworker is not generally acceptable.

If you do get help from family member, lenders require this to come in the form of a "gift."  If you're really borrowing the money from your family member, intending to pay it back later -- your lender doesn't want to know about it.  With rare exceptions, you are not allowed to borrow money to come up with your down payment.

Your lender will supply you with a form called a "gift letter." The gift letter states the relationship between the parties, the address of the purchased property, the amount of the gift, and sometimes the source of the funds used to make the gift. The gift letter also clearly states that the funds are a gift and not required to be repaid.  You and the person providing the gift will have to sign the letter.

With most lenders, the donor will have to also provide evidence that they have the ability to make the gift. This can be in the form of a bank or stock statement to show they have the funds available. You should also make a copy of the check used to make the gift and keep a copy of the deposit receipt when you deposit the gift funds into your bank account or escrow.

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