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Cs, Home Buyer in Tampa, FL

Gift letter and "proof" for down payment donation from father?

Asked by Cs, Tampa, FL Wed Jan 20, 2010

Hello, my father is willing to give me the 20% down payment for the purchase of a condo. When I spoke to a loan officer earlier today to talk about pre-qualification, he mentioned I would need a gift letter along with proof that my father was able to afford to give me the down payment. My father is ok with signing a gift letter but is not comfortable providing bank statements or other proof. Do all lenders require this or are there some that will simply accept a gift letter?

Thanks,
Carlos

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Sounds like they are asking a bit much. The gift letter and proof of funds should be sufficient. Mentioned earlier- an official letter from your Dad's bank should be enough to "prove" that he has the funds- people change thier mind too.... just cause your Dad has the money... he may later decide to reneg on his promise.
3 votes Thank Flag Link Wed Jan 20, 2010
Carlos,

You will find that what your loan officer is requesting is an industry standard. Bank statements will be required from your father or the gift may not be used. You will need to supply the statements prior to your loan approval.
2 votes Thank Flag Link Wed Jan 20, 2010
Get your Father's Bank officer to write a letter stating that he has sufficient funds for a down payment of $XX. Lender should be fine with that.
2 votes Thank Flag Link Wed Jan 20, 2010
The gift letter is just that, a statement of where the money is coming from and why you are receiving it. Many lenders have a standard form, others just want a generic statement. A copy of your bank statement showing the money has been deposited would be enough proof (along with the cancelled check possibly), the lender shouldn't need any of your fathers financial records. Murray's answer points out a good caution, the amount may have tax consequences you should be aware of prior to accepting the money.

Steven J. Pahl

Steve@Steven Pahl.com

813-319-6423
Web Reference: http://www.StevenPahl.com
1 vote Thank Flag Link Thu Jan 21, 2010
Hi, Cs

Your lender should have a gift form letter that they use to give to you. Typically the top portion states the amount of the gift, the relationship between you and the donor and that the gift does not have to be paid back. The bottom half is filled by your father's bank stating which account the funds came from and nothing more.

Along with that, you'll need to provide your lender with a copy of the certified check and just bring the actual one to the closing table. Mind you: if you deposit the check into your account, you'll need to provide your lender with an updated bank statement refecting the deposit. Depending on how soon your closing, to save time and paperwork, make the certified check out to you and just bring it to the close.
1 vote Thank Flag Link Wed Jan 20, 2010
Your father shouldn't need to turn over bank statements. What they really want to see is an official letter from your father's bank stating that he has the money in his account, and the amount mentioned in the letter should be for only the amount of which he is giving you.

Thinking about the gift, Last time I checked, the IRS allows something like $11,000 gift per person per year without tax consequence. So depending on the amount of the gift, you may owe Uncle Sam taxes on some of it. I would highly recommend checking that with a quick phone call to your accountant, and if you don't have one, get one. There are ways to massage that such as if you are married, your dad could gift up to the max to you, and again to your wife. If your father is married, he and his wife could each gift you the max, each year. Just something extra to think about.
1 vote Thank Flag Link Wed Jan 20, 2010
The correct answer is as Carl Henker stated.

Banks need to see a copy of the donor's bank statement. It is a banking guideline-it's not asking too much, your lender is only asking to play by the rules.

Most underwriters do not care if the money was in the donor's account for a day or a week or a month-it's not the same a verifying your own funds which have to be seasoned. They don't care where your father is getting the money from. They only care about where you're getting your funds.

If your father is the private type and doesn't want anybody to see his account, ask your lender if it is ok for him to open a new checking account in his name so he can deposit your 20% deposit there. This way it won't be an intrusion on your father's privacy.

I hope this helps.

Good luck.
0 votes Thank Flag Link Thu Jan 21, 2010
Hi,
Lenders want to see that he was able to give you the money and not have to repay it. If he is using a bank account, then just the front page is usually good. If a Line of Credit is used, then again just the front page.

Chris Suarez
Suarez Home & Finance Corp.
352-754-6191
0 votes Thank Flag Link Thu Jan 21, 2010
hi Chris why does a loan officer ask for a gift letter?
Flag Fri Jun 7, 2013
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