B3-4.3-04, Personal Gifts (12/14/2022)

Gift Funds

A borrower of a mortgage loan secured by a principal residence or second home may use funds received as a personal gift from an acceptable donor. Gift funds may fund all or part of the down payment, closing costs, or financial reserves subject to the minimum borrower contribution requirements below. Gifts are not allowed on an investment property.

Acceptable Donors

A gift can be provided by:

• a relative, defined as the borrower’s spouse, child, or other dependent, or by any other individual who is related to the borrower by blood, marriage, adoption, or legal guardianship; or

• a non-relative that shares a familial relationship with the borrower defined as a domestic partner (or relative of the domestic partner), individual engaged to marry the borrower, former relative, or godparent.

The donor may not be, or have any affiliation with, the builder, the developer, the real estate agent, or any other interested party to the transaction.

See  B3-4.3-06, Grants and Lender Contributions, for information about donations from entities (grants).

Minimum Borrower Contribution Requirements

The following table describes the minimum borrower contribution requirements for transactions that contain gifts.

Documentation Requirements

Gifts must be evidenced by a letter signed by the donor, called a gift letter. The gift letter must:

• specify the actual or the maximum dollar amount of the gift;

• include the donor’s statement that no repayment is expected; and

• indicate the donor’s name, address, telephone number, and relationship to the borrower.

When a gift from an acceptable donor is being pooled with the borrower’s funds to make up the required minimum cash down payment, the following items must also be included:

• A certification from the donor stating that they have lived with the borrower for the past 12 months and will continue to do so in the new residence.

• Documents that demonstrate a history of borrower and donor shared residency. The donor’s address must be the same as the borrower’s address. Examples include but are not limited to a copy of a driver’s license, a bill, or a bank statement.

Verifying Donor Availability of Funds and Transfer of Gift Funds

The lender must verify that sufficient funds to cover the gift are either in the donor’s account (such as a checking, savings or investment account owned by the donor) or have been transferred to the borrower’s account. Acceptable documentation includes the following:

• a copy of the donor’s check and the borrower’s deposit slip,

• a copy of the donor’s withdrawal slip and the borrower’s deposit slip,

• evidence of the electronic transfer of funds from the donor's account to the borrower's account or to the closing agent;

• a copy of the donor’s check to the closing agent, or

• a settlement statement showing receipt of the donor’s check.

When the funds are not transferred prior to settlement, the lender must document that the donor gave the closing agent the gift funds in the form of an electronic transfer, certified check, a cashier’s check, or other official check.