How to deal with cash gift?

[Nik2010]

Here is my dilemma…tell me what you think.

I’m currently in the portion of the process where I already have the sales contract, appraisal, inspections, etc. completed.  I already filled out the FHA universal app, and have sent the LO all my returns, statements, W2s and a couple LOEs.  There are a couple things I’m waiting for, like statement showing my closing funds…which will be here with my tax refund in the next week or so. 

However, before this process, I had to transfer some funds from one investment account to my checking, to cover my $1000 earnest money for the offer.  The transfer was supposed to be by direct deposit, but ended up the bank I was dealing with didn’t have the right account info, and instead of asking me about it, they just sent out a physical check.  As we all know, physical checks take so much longer, but I had to make my offer if I wanted to snag the house.  My boss helped me out by giving me the $1000 to put in the bank to cover the earnest money if the earnest money check was cashed before my own transfer cleared.  I would just pay him back as soon as my money cleared into my account.  Needless to say, my LO lamented on how he wished that he was able to get to his clients before the offer is made...and to never use cash!!  Hah hah  So we’re dealing with a deposit of $1000, and it was cash.  LO was going to look into how to explain this deposit to the UW.  I still haven’t heard back from him on it…so I thought I’d ask here.  The $1000 is not needed at this point, never really was, as the earnest money check wasn’t cashed until after my transfer cleared anyway.  I want to give him the $1000 back ASAP.  What’s my best move here?  Will they most likely need a gift letter or something, or a copy of his bank statement showing the cash withdrawal, even though I’m just giving it back to him before closing?

[BrianB_The_Loan_Professor]

In this situation I would wait to hear back from your lender - they will tell you what they want you to do

Given the circumstances it could be done a couple of ways so make sure you dont spin your wheels and just do what they ask.

Be upfront and honest (Like you have been) this always makes it easier - 

It may be as simple as a letter of explanation - or they could want full gift letter - bank statements and despoit slips 

In this case though it wasnt a gift it was a loan so paying it back will most likely be a requirement (I know thats the intent)

Good Luck
Brian

[Nik2010]

Thanks for the insight, Brian!

[DallasLoanGuy]

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@Nik2010 wrote:

Here is my dilemma…tell me what you think.

I’m currently in the portion of the process where I already have the sales contract, appraisal, inspections, etc. completed.  I already filled out the FHA universal app, and have sent the LO all my returns, statements, W2s and a couple LOEs.  There are a couple things I’m waiting for, like statement showing my closing funds…which will be here with my tax refund in the next week or so. 

However, before this process, I had to transfer some funds from one investment account to my checking, to cover my $1000 earnest money for the offer.  The transfer was supposed to be by direct deposit, but ended up the bank I was dealing with didn’t have the right account info, and instead of asking me about it, they just sent out a physical check.  As we all know, physical checks take so much longer, but I had to make my offer if I wanted to snag the house.  My boss helped me out by giving me the $1000 to put in the bank to cover the earnest money if the earnest money check was cashed before my own transfer cleared.  I would just pay him back as soon as my money cleared into my account.  Needless to say, my LO lamented on how he wished that he was able to get to his clients before the offer is made...and to never use cash!!  Hah hah  So we’re dealing with a deposit of $1000, and it was cash.  LO was going to look into how to explain this deposit to the UW.  I still haven’t heard back from him on it…so I thought I’d ask here.  The $1000 is not needed at this point, never really was, as the earnest money check wasn’t cashed until after my transfer cleared anyway.  I want to give him the $1000 back ASAP.  What’s my best move here?  Will they most likely need a gift letter or something, or a copy of his bank statement showing the cash withdrawal, even though I’m just giving it back to him before closing?

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you dont need a gift letter.... because it isnt a gift.

you will need to write a letter explaining the situation.

basically, the $1000 cash deposit will be backed out of the lenders calculations as it is not allowable monies.

i have done this before.

[Nik2010]

Thanks!  That helps a lot.