If you have been advised or are proceeding with the belief that all funds needed to complete an FHA Loan (insert link) are to be cash on-hand in your personal bank accounts then you would be mistaken. It would be nice if you had the cash in your bank accounts to get a loan completed, but this is not always the case and there are FHA Guidelines on Gift Funds that I am going to go into so you can ensure you have the funds you need to purchase that home you desire. Contrary to popular believe FHA Guidelines on Gift Funds allow for 100% of funds used to close on your home to be sourced from gift funds. Now just because you know that gift funds can be had, you still need to follow the FHA Guidelines on Gift Funds or you can find these funds disqualified which can ultimately put your home purchase in jeopardy. Now according to the document HUD 4155.1 under Chapter 5, Section B this goes into detail about what funds are determined to be acceptable for cash gifts if received from:
On the flip side of this, FHA also outlines where these funds cannot come from and they are:
There is also documentation required in order to ensure that these funds have been received properly and primarily what you are going to need is the donor’s bank statement that show evidence of the funds leaving their account and the corresponding deposit made into the borrower’s bank account. In addition to this it is also wise to obtain all documentation from the donor including copy of the cashier’s check, money order, or the wire exiting the donor’s account for the funds in question.
For borrowers to use these funds the FHA Guidelines outline that these funds can only be used for down payments and closing costs. Additional funds that remain after your down payment and closing costs, cannot be used for any other costs or fund requirements associated with the loan. Restrictions on gift funds can be seen as they are not allowed as reserve funds which typically include up to 3 months of future housing payments after the loan has closed. As you can see, FHA Guidelines on Gift Funds are pretty lenient, but the fact of the matter is you are going to need some of your own funds too in order to ensure your loan gets approved and closed on-time. I can work with you to come up with a customized plan in order for you to obtain all the funds necessary to purchase your home. Please reach out to me at 630-465-2656 at anytime if you have questions or you can always start your application by clicking here.
Just because FHA Guidelines on Gift Funds are followed doesn’t necessarily mean that all lenders are equal and are going to allow for these funds to be used towards your home purchase. As with a lot of lenders there can be Lender Overlays which lenders put in place to disqualify the use of these funds. Here at Fairway Independent Mortgage Corporation NMLS# 2289 we don’t have Lender Overlays and as long as FHA Guidelines on Gift Funds are followed then there is no way these funds will be disqualified. The key component here is to make sure you have the proper documentation in place so when an underwriter is going through your loan file, it is easily seen where these funds came from and who they came from. As long as the rules above are followed you shouldn’t have to worry about this.
If you are confident you are following the FHA Guidelines on Gift Funds then you need to contact me today and I can ensure that I will keep you on the path to home ownership. I take pride in my borrowers and want to make sure I do everything I can to assist in your home buying experience.