Receiving Gift Funds For An FHA 203k Rehab Loan

Will you have the opportunity to use gift funds as the down payment for your FHA 203k mortgage?

If so, FHA guidelines require that you provide transfer documentation for both the source and receipt of the gift. In addition, a borrower must provide the lender with a “gift letter” that includes the donor’s name, address and telephone number, the dollar amount of the gift, the donor’s relationship to the borrower, and a statement that no repayment of the gift funds is required.

The gift letter must be signed and dated by both borrower and donor.

Acceptable sources of gift funds for a 203k loan:

• A relative of the borrower
• A charitable organization
• The borrower’s employer or labor union
• A close friend with a documentable relationship to the borrower
• A government agency or public entity that provides home ownership assistance

Unacceptable gift funds sources include undocumented cash, the seller, the real estate agent or mortgage loan officer, the builder, or any other party to the transaction.

Appropriate Gift Funds Documentation:

Are the gift funds already present in the borrower’s bank account?

If so, a copy of the document showing the withdrawal from the donor’s account is required, as well as the deposit slip and bank statement reflecting the deposit of said funds into the borrower’s account.

Will the gift funds be provided at closing in the form of a check or money order?

If so, the donor must provide a document or canceled check showing the amount of the gift funds and their withdrawal from the donor account.

Will the funds be provided at closing as a wire transfer?

The donor must provide documented evidence of the transfer.

Will the funds be provided at closing via a loan to the donor?

The donor must provide written documentation that the funds were borrowed form an acceptable source and NOT from any party to the transaction, including the 203(k) lender.

Page Tags: FHA 203k Gift Funds | Receiving 203k Gift Funds