Many homebuyers use gifts from relatives and friends to help fund the down payment for their home purchase. It is very important to make sure the gifts you are receiving are traceable so lenders know where your money is coming from. Part of the mortgage process involves the lender to verify all your financial accounts so a proper paper trail is necessary in order for your loan to be approved.

First you will need to obtain a gift letter that can be provided by your lender that includes the amount of the gift, the property address, the relationship of the gifter to the giftee, and a note that states the gift is not a loan and will not be repaid. After all parties sign the letter, a check should be written out with the exact dollar amount stated in the letter. Note that a photocopy of the check will be required by the lender.

When depositing the check, remember to make the deposit into the account from which your money at closing will be taken from. Also, only deposit the gift funds and do not make any other transaction, don’t forget your receipt which will be required by the lender.

The last thing you should be aware of is that not all types of mortgage loans have the same guidelines for down payment gifts. Some require the down payment to be at least five percent of the borrowers own funds and others do not have any limits. Speak with your mortgage lender before starting the gifting process to prevent any setbacks.