topic Re: FHA downpayment gift requirements--does it have to be a family member? in Mortgage Loans

FHA downpayment gift requirements--does it have to be a family member?

valley_man0505 — Wed, 04 Feb 2009 22:05:08 GMT

I was always under the impression that gifted money from an FHA loan could come from a family member OR a friend. I just spoke with a mortgage broker, however, who told me that it HAS to be from a family member. Is this true?

Re: FHA downpayment gift requirements--does it have to be a family member?

Anonymous — Wed, 04 Feb 2009 22:16:39 GMT

Hi valley_man,

Not true. You are correct.

Gift money to cover an FHA downpayment and/or closing costs

can come from family members, a close friend, your employer,

a charity or a non-profit organization. So there are lots of sources

for gift funds

This is an FHA provision. If your lender is telling you something

different, talk to another lender.

Hope this helps.

CanDo

"The right attitude is everything"

Message Edited by CanDoAttitude on 02-04-2009 02:16 PM

Re: FHA downpayment gift requirements--does it have to be a family member?

BrianB_The_Loan_Professor — Wed, 04 Feb 2009 22:16:18 GMT

CanDo is correct - some lenders do not like the close friend because that could be anyone - it is tough to link them to you.

Good luck

Re: FHA downpayment gift requirements--does it have to be a family member?

valley_man0505 — Thu, 05 Feb 2009 14:42:23 GMT

Interesting. She also told me that if my scores were over 620, I "should be able to get my rate at close to 6.5% rather than the almost 7% it has been lately". I know FHA typically pays a little higher rate than conventional, but this is higher than expected. Bankrate.com was showing the FHA rate in my area around 5.4% at the end of January. I see it did jump in February up to about 5.8% for some reason, though, even though the conventional rate did not really change.

Re: FHA downpayment gift requirements--does it have to be a family member?

valley_man0505 — Thu, 05 Feb 2009 19:16:51 GMT

I called the FHA resource line regarding this question. They directed me to their handbook, which contains the following:

Gift Funds. An outright gift of the cash investment is acceptable if the donor is the borrower’s relative, the borrower's employer or labor union, a charitable organization, a governmental agency or public entity that has a program to provide homeownership assistance to low- and moderate-income families or first-time homebuyers, or a close friend with a clearly defined and documented interest in the borrower. The gift donor may not be a person or entity with an interest in the sale of the property, such as the seller, real estate agent or broker, builder, or any entity associated with them. Gifts from these sources are considered inducements to purchase and must be subtracted from the sales price. No repayment of the gift may be expected or implied. (As a rule, we are not concerned with how the donor obtains the gift funds provided they are not derived in any manner from a party to the sales transaction. Donors may borrow gift funds from any other acceptable source provided the mortgage borrowers are not obligors to any note to secure money borrowed to give the gift.)

The second part I hi-lighted was interesting to me as well. It sounds here as if the person giving you the money can actually take out a loan for the money and then give the money to the buyer as long as the buyer is not attached to the loan in any way.

Re: FHA downpayment gift requirements--does it have to be a family member?

ShanetheMortgageMan — Fri, 06 Feb 2009 18:34:34 GMT

The close friend with a defined/documented interest in the borrower is one that can work though. Had a client who was getting a gift from their godfather, we had a signed affidavit by both parties, photos of them all together at various points in their lives, and a drivers license, it did the trick.

Re: FHA downpayment gift requirements--does it have to be a family member?

valley_man0505 — Fri, 06 Feb 2009 18:55:59 GMT

Does living together for over a year meet the requirements? If so, how do we go about proving that? My GF's mail has been coming to my address for over a year, but her name is not on any of the utilities or lease. We are "unofficially" engaged (by that, I mean we haven't told anyone else yet). Maybe we can just make-out in front of the lender

Re: FHA downpayment gift requirements--does it have to be a family member?

ShanetheMortgageMan — Fri, 06 Feb 2009 19:09:04 GMT

How long have you really known this girl and her family?

Re: FHA downpayment gift requirements--does it have to be a family member?

valley_man0505 — Fri, 06 Feb 2009 19:23:17 GMT

About 2 years. We have been living together since October 2007. If her credit was a littler better, I would actually like to just have her on the mortgage with me, but I don't think her scores will get to where they need to be in time.

Message Edited by valley_man0505 on 02-06-2009 11:23 AM

Re: FHA downpayment gift requirements--does it have to be a family member?

ShanetheMortgageMan — Fri, 06 Feb 2009 19:27:08 GMT

2 years is a bit short, if it was 5 years or longer I could see it being easier to work with. It's all going to be based on the entire situation though. If your credit is low, debt ratio is high, no reserves, etc... odds are an underwriter isn't going to accept it. But if everything is great, well they won't place as much emphasis on the duration/strength of the relationship. Put a ring on her finger, get your proposal on video, and I think that would seal the deal.

Re: FHA downpayment gift requirements--does it have to be a family member?

valley_man0505 — Fri, 06 Feb 2009 19:55:05 GMT

Why exactly is this an issue anyway? It is not like the money can be taken back after it has been paid and the mortgage has been finalized.

For the most part, my DTI will be excellent. The main reason I don't have the down payment money on my own is because of how hard I have worked to pay off my derogatory debts to get my scores to where they are. I actually paid off $10,000 worth of debts in the past year while also paying two car loans (my divorce decree required me to pay for the remaining balance on my ex-wife's vehicle, but there is only 1 payment left now).

Re: FHA downpayment gift requirements--does it have to be a family member?

ShanetheMortgageMan — Fri, 06 Feb 2009 20:21:14 GMT

Were you planning on getting added to each other's bank accounts soon anyway? Could just speed up the process and then her funds would be your funds.

Re: FHA downpayment gift requirements--does it have to be a family member?

valley_man0505 — Fri, 06 Feb 2009 21:03:33 GMT

You know, I never even thought about that option. Would adding my name to her bank account solve the problem? My concern with that is that the downpayment money is going to be coming from a) her tax refund, which is going to be about $6000 and b) an insurance settlement in the amount of $8300 that she will be receiving (we will only need about $4000 to cover the downpayment requirement for the price range we will be looking at). Since the money is coming from large deposits that are obviously directed to her, would simply having my name on her bank account truly make the funds "mine" in the eyes of an underwriter?

Re: FHA downpayment gift requirements--does it have to be a family member?

ShanetheMortgageMan — Fri, 06 Feb 2009 21:57:57 GMT

Well technically yes, underwriters have said as long as you are on the account, and aren't on the account solely for the purpose of being qualifed for the mortgage (meaning you intended to be on the account anyway) then the funds can be used... but underwriters are looking very closely at transactions these days, so you'd want to obviously write a "master letter of explanation" outlining the situation with you and your girlfriend, but then in addition also documentation of showing you have a close relationship, pictures together, perhaps even get some friends to each write a few sentences about your love & devotion for each other, and I think it'd be hard for an underwriter not to accept that.

Re: FHA downpayment gift requirements--does it have to be a family member?

valley_man0505 — Fri, 06 Feb 2009 22:11:17 GMT

I am sure that shouldn't be a problem. I am actually raising her son as if he is my own and I plan to adopt him once her and I do get married. My daugher already considers him her little brother. Someway, somehow, we should be able to convince the necessary people. Thanks for the advice.

Re: FHA downpayment gift requirements--does it have to be a family member?

ShanetheMortgageMan — Fri, 06 Feb 2009 22:18:19 GMT

Oh you mean you aren't 21 years old?? LOL when I see "girlfriend" and that you are secretly engaged I always think younger. I'm sure an underwriter would be more comfortable with a budding relationship for someone who has shown other areas of responsibility in their life (such as raising children), so since your daughter and her son are in the picture be sure to include that information in your explanation letter too. Yeah I think you have a better chance than most others who'd have a 2 year relationship.

Re: FHA downpayment gift requirements--does it have to be a family member?

valley_man0505 — Sat, 07 Feb 2009 19:33:03 GMT

Lol. Actally, I am 30 and she is 24. Her son is almost 1-year old. Her and I met about 2 years ago, but did not actually start dating until after her pregnancy. The "father" wanted nothing to do with any of it, so her and I got real close while I was helping her through everything and we eventually started dating and it got real serious real fast. My daughter is almost 6 years old already. The reason for the "secret" engagement is that my ex-wife destroyed life as I know it for me, so my entire family is really scared about me ever getting married again, so we are going to give it some more time before we tell everyone else.

Technically, the money that my fiance is going to give to me is money that she "owes" me, since she has always promised to pay half the rent when she moved in, but she was never able to because she never got any child support from the "father" until a month or two ago. When she was struggling for money, she always promised she would pay me back for all the months she didn't pay any of the rent once she got her money this spring. I would never actually hold her to that, but "technically" that money is money that she "owes" to me. I have a feeling that wouldn't make a difference, though, so I am going to plan on the money being considered a gift.

Re: FHA downpayment gift requirements--does it have to be a family member?

Anonymous — Sat, 07 Feb 2009 19:39:40 GMT

6.5% would be high for FHA in my area although they have been inching up. It's averaging about 5.25 to 5.5% right now around here. Check bankrate.com for your local area. If you lender is talking about 7% (!!!) and giving you grief over the friend helping you with the downpayment, then check out a different lender.

Re: FHA downpayment gift requirements--does it have to be a family member?

DallasLoanGuy — Sat, 07 Feb 2009 19:42:37 GMT

a fiance is an acceptable source of gift funds

Re: FHA downpayment gift requirements--does it have to be a family member?

valley_man0505 — Mon, 09 Feb 2009 17:04:58 GMT

Well, I contacted the brokerage that told me the gift had to be from a family member and told them I had spoken with the people from FHA directly and that they confirmed it could be from a friend and that they directed me to the necessary handbook stating so. I asked if this "family only" thing was a requirement of their brokerage of it was an FHA requirement in general. They said it was an FHA requirement. I told them that they were wrong about that and they responded saying that 99% of the loans they do are FHA loans and they are actually the largest FHA lender in the state, but they have never heard of that. They said they would love to see it open to friends and asked me for the handbook number and said that they have also contacted people from FHA for confirmation. However, they also said that even if FHA allows it, that doesn't mean the underwriters will, which, unfortunately, is a good point This whole conversation is moot if the underwriters don't accept it even if FHA allows them to if they want.