100% Gift Guidelines

GIFTS

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. Gifts are not allowed for investment property transactions.

 

ACCEPTABLE DONORS

A gift can be provided by:

• 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

• Fiancé, fiancée or domestic partner

o Domestic Partner: An unrelated individual who shares a committed relationship with the primary wage earner, currently resides in the same household as the primary wage earner and intents to occupy the security property with the primary wage earner.

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.

 

DOCUMENTATION REQUIREMENTS

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

• Specify the dollar amount of the gift

• Specify the date the funds were transferred

• Include the donor’s statement that no repayment is expected

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

• Identification of the property being purchased (Freddie Mac only)

When a gift from a relative or domestic partner 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 he/she has 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

Documentation must be provided to evidence that the gift has been transferred to the borrower’s account. Acceptable documentation includes the following:

Copy of the donor’s cancelled check and the borrower’s deposit slip

• Copy of the donor’s withdrawal slip and the borrower’s deposit slip

If the transferred occurred with certified funds, a letter from the bank that issued the certified check must be provided stating that the funds came from the donors account. All gifts other than gifts of equity must be transferred prior to closing.

 

MINIMUM BORROWER CONTRIBUTION REQUIREMENTS

Freddie Mac: If the gift is less than 20% of the sales price, the borrower must contribute his or her own funds equal to at least 5% of the purchase price of the property.

Fannie Mae: The following table describes the minimum borrower contribution requirements for transactions that contain gifts:

Transactions That Contain Gifts

LTV, CLTV or HCLTV

Minimum Borrower Contribution Requirement from Borrower’s Own Funds

≤ 80%

1 to 4-Unit principal residence

Second home

A minimum borrower contribution from the borrower’s own funds is not required. All funds needed to complete the transaction can come from a gift.

> 80%

1-Unit principal residence

A minimum borrower contribution from the borrower's own funds is not required. All funds needed to complete the transaction can come from a gift. Loans requiring mortgage insurance must follow mortgage insurance company requirements for own funds.

2 to 4-Unit principal residence

Second home

High-balance mortgage loans

The borrower must make a 5% minimum borrower contribution (or 3% for MCM) from his or her own funds. After the minimum borrower contribution has been met, gifts can be used to supplement the down payment, closing costs and reserves. See the MyCommunityMortgage program for additional information about MCM minimum borrower contribution and down payment requirements.

 

FANNIE MAE AND FREDDIE MAC EXCEPTIONS

Borrowers to use gift funds for some or all of the minimum contribution in the following situations:

• Borrowers may pool their funds with gift funds received from one of the following sources:

o a relative or domestic partner who has lived with the borrower for the last 12 months

o a fiancé or fiancée, as long as both individuals will use the home being purchased as their principal residence.

When a mortgage has an LTV ratio of 80% or lower (or combined LTV ratio, for mortgages that have subordinate financing), gift funds from an acceptable donor may be used to make the entire down payment.

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