A borrower of a mortgage loan secured by a principal residence or second home may use funds received as a personal gift from an acceptable donor. Gift funds may fund all or part of the down payment, closing costs, or financial reserves subject to the minimum borrower contribution requirements below. Gifts are not allowed on an investment property.
A gift can be provided by:
a relative, defined as the borrower’s spouse, child, or other dependent, or by any other individual who is related to the borrower by blood, marriage, adoption, or legal guardianship; or
a fiancé, fiancée, or domestic partner.
The donor may not be, or have any affiliation with, the builder, the developer, the real estate agent, or any other interested party to the transaction.
The following table describes the minimum borrower contribution requirements for transactions that contain gifts.
|LTV, CLTV, or HCLTV Ratio||Minimum Borrower Contribution Requirement from Borrower’s Own Funds|
|80% or less||One- to four-unit principal residence
|A minimum borrower contribution from the borrower’s own funds is not required. All funds needed to complete the transaction can come from a gift.|
|Greater than 80%||One-unit principal residence||A minimum borrower contribution from the borrower's own funds is not required. All funds needed to complete the transaction can come from a gift.|
|Two- to four-unit principal residence
The borrower must make a 5% minimum borrower contribution from his or her own funds. 1 After the minimum borrower contribution has been met, gifts can be used to supplement the down payment, closing costs, and reserves.
See B5-6-03, HomeReady Mortgage Underwriting Methods and Requirements, for HomeReady mortgage minimum borrower contribution and down payment requirements.
Gifts must be evidenced by a letter signed by the donor, called a gift letter. The gift letter must:
specify the dollar amount of the gift;
specify the date the funds were transferred;
include the donor’s statement that no repayment is expected; and
indicate the donor’s name, address, telephone number, and relationship to the borrower.
When a gift from a relative or domestic partner is being pooled with the borrower’s funds to make up the required minimum cash down payment, the following items must also be included:
A certification from the donor stating that he or she has lived with the borrower for the past 12 months and will continue to do so in the new residence.
Documents that demonstrate a history of borrower and donor shared residency. The donor’s address must be the same as the borrower’s address. Examples include but are not limited to a copy of a driver’s license, a bill, or a bank statement.
The lender must verify that sufficient funds to cover the gift are either in the donor’s account or have been transferred to the borrower’s account. Acceptable documentation includes the following:
a copy of the donor’s check and the borrower’s deposit slip,
a copy of the donor’s withdrawal slip and the borrower’s deposit slip,
a copy of the donor’s check to the closing agent, or
a settlement statement showing receipt of the donor’s check.
When the funds are not transferred prior to settlement, the lender must document that the donor gave the closing agent the gift funds in the form of a certified check, a cashier’s check, or other official check.
The table below provides references to the Announcements and Release Notes that have been issued that are related to this topic.
If the borrower receives a gift from a relative or domestic partner who has lived with the borrower for the last 12 months, or from a fiancé or fiancée, the gift is considered the borrower’s own funds and may be used to satisfy the minimum borrower contribution requirement as long as both individuals will use the home being purchased as their principal residence.