The Problem That Starts With Someone Trying to Do Something Nice

Your family wants to help you buy a home and that is an incredible thing. But one of the most consistent sources of delays and complications in the mortgage process starts with exactly that kind of generosity when it happens in the wrong order.

Mom or dad transfers money before anyone speaks with a lender. Now everyone has questions. Where did it come from? Is it a gift or a loan? How do you document the source? Does it need to be in the account for a certain number of days before closing? The answer to all of those questions exists and the process to handle gift funds correctly is well-established. But discovering the need for that process after the transfer has already happened creates documentation requirements and potential delays that simply do not exist when the conversation happens first.

Why Lenders Have to Ask About Gift Funds

When an underwriter reviews bank statements as part of the mortgage process any large deposit that appears without a clear and documented source has to be explained and verified. A gift from a family member is an entirely acceptable and commonly used source of down payment funds. The documentation requirements for it are straightforward when everyone knows what they need to provide from the beginning.

What creates the complication is the sequence. A transfer that happens before the lender knows it is coming, before a gift letter has been drafted, before the donor's ability to provide the gift has been documented, turns a simple and anticipated transaction into a paper trail that has to be reconstructed after the fact. That reconstruction takes time and can push a closing date.

The Five Minute Conversation That Prevents All of It

As Dave Weston at the Dave Weston Group with Hallmark Home Mortgage explains almost every one of these problems can be avoided with a five-minute conversation before any money changes hands. Not after. Before.

That conversation establishes exactly how the gift needs to be structured, what documentation will be needed from both the recipient and the donor, the timing of when the funds should be transferred relative to the loan process, and how to make sure everything the underwriter needs is in place before the question is ever asked.

Buying a home is stressful enough. A well-intentioned gift from family should make the process easier not harder. Getting the sequence right from the beginning is what makes that possible.

If a family member is helping you buy a home call Dave Weston first. He will help you do it right the first time so you can know before you owe.

Dave Weston with the Dave Weston Group at Hallmark Home Mortgage is dedicated to helping homebuyers feel at home as they buy one. Reach out before any money moves and make sure the generosity your family is showing you works exactly the way it was intended.

Sources

ConsumerFinancialProtectionBureau.gov
FannieMae.com
MortgageNewsDaily.com
Investopedia.com
HUD.gov