Did anyone have family directly pay off a debt for them prior to applying for a mortgage?

[buyhouse36]

Hello!

What I am asking is....Did parents, family, etc help you clear debt so you can apply for a mortgage by directly paying off creditors?? No giant bank deposit...payments were sent directly to creditors.

If so, how long did you wait before applying for a mortgage??

Did U/W inquire about debts paid off suddenly? If so, what explanation did you give?

Did you have to supply a gift letter?

Thanks in advance.

[Sunshine85]

If you wait until the paid off balances report on all three bureaus, and then you apply for the mortgage, the UW will not know the debts were paid down. 

Is this a gift or loan? If a loan, you will need to handle differently. If the payoffs were a gift, just wait until all balances report zero so that you get no questions from underwriting. There should be no need for a gift letter, either. 

ETA- I just read your other post. If you're using the same lender you've already applied to, they will definitely want to know how the debts were paid off. If your family pays off the accounts directly, the lender will most likely want a gift letter stating you are not required to pay them back, and they will need to source the funds used for the payoffs as well. 

[buyhouse36]

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ETA- I just read your other post. If you're using the same lender you've already applied to, they will definitely want to know how the debts were paid off. If your family pays off the accounts directly, the lender will most likely want a gift letter stating you are not required to pay them back, and they will need to source the funds used for the payoffs as well. 

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Different lender. My first lender was from my local bank. When I received the GFE the fees were too high. After the fiasco with the dispute remarks, I decided to ask around while I wait for my scores to bounce back. My realtor recommended someone who I think will work out just fine. That big debt that was taken care of for me, hit my report as 0 balance in November as well. My new lender will pull my report no later than Jan 2. Hopefully my scores will be above 720 again. I was wondering if that would be enough time to not draw an inquisition.

[vmdizzle33]

My father directly paid off my credit cards. I just waited a month until they cleared on my credit report. I even had to turn in my statements which showed the huge lump payments, they did not ask any questions. They don't care how it was paid off, just care about your DTI. The only time you need a letter stating it was a gift and such is if you are getting the money for down payments as a gift, some loans don't allow that.

[Peter1142]

I used gift funds only for closing costs and was asked for a gift letter, sourced funds, the whole 9 yards.

No one looked at my credit statements. But I do not have large balances or limits.