Fannie Mae Gift Letter: Fill & Download for Free

Down payment gifts are pretty common, especially with younger buyers. Gift rules are different depending upon the mortgage program.FHA allows a broader array of donors such as family members, charitable organizations, employers, etc.Fannie Mae is more restrictive; donors must be related by blood or by law.In either case, a mortgage gift letter is required. It’s a declaration by the borrower and donor that there will be no expectation of repayment. Gift funds must come with no strings attached.

Lenders will require proof of fund, especially for down payments for real estate. This is a requirement of Fannie Mae, Freddie Mac, and most other sources who underwrite these loans. So, you’ll need to verify where the funds are coming from. For example, if you have the money in a bank account, they’d require the statements for that account to show it’s been there, or want to source where it came form if you had a large deposit one month.If it’s coming from a family member they’ll source it from them, then require a gift letter stating they are gifting you the money. So wherever you are getting the money from, they’ll want statements showing that the money is coming from those sources and that you have the funds there before they close the loan.I hope this helps!

It is not illegal, but personal unsecured loans are not an acceptable source of funds to close, per Fannie Mae and Freddie Mac guidelines.Here are some realities, however. A child borrows money from the Bank of Dad for some or all of the down payment. The loan has flexible repayment terms and is not reported to the credit bureaus. The funds from the Bank of Dad are deposited into Junior’s checking account.Junior provides two bank statements to the lender to verify assets. The proceeds from Dad’s loan were deposited more than two months ago, so it doesn’t show up on either of the two statements. The lender has no way of knowing. That is the reality.If Dad gives Junior money today for a purchase, he’d also sign a gift letter, stating that the money is a gift for the purchase of a home and that it does not have to be repaid. Whether Junior decides to, let’s say, “regift” the money back to Dad at some point is something between parent and child. I am sure it is done often. But from a lending standpoint, the gift letter is sufficient to document the funds.The guideline is really meaningless. If a home buyer wants to borrow money to buy, there is nothing to stop them. I once had a buyer try to take a $10,000 cash advance against his credit card to buy. He would have paid 24% interest on the money and he would not have qualified for the loan with the $300 additional monthly payment on the credit card.If he had taken the money out and deposited it early enough so that the large deposit did not appear on the last two bank statements, he could slide by—but the debt and payment would now show up on his credit report.But if someone gets a loan from the Bank of Dad and they deposit the money far enough ahead of time, there is no way anyone would be able to stop it.