Getting Gift Funds for your down payment on a Kentucky FHA Mortgage. 

Gift Funds for a Mortgage Loan Approval.

What is the Great Way to do it?

To avoid getting turn down for your Kentucky FHA mortgage loan if you are getting a gift from your mom, dad or another family member, please follow these rules:

The source of the down payment must always show Kentucky FHA gift funds and their source (usually a relative). It cannot be a personal loan or cash.

Common Gift Fund Issues:

Scenario 1 – only gift funds being used in the transaction
Gift amount: $5,000

Common submission problem:

  • Source of down payment submitted as “checking and savings account.”
  • Asset submitted as “checking account” with the financial institution as “Gift from Relative.”

Correct submission practice:

  • Source of a down payment should be submitted as an “FHA Gift from a relative for $5,000”
  • If funds are not yet in the bank account, DU should be submitted as miscellaneous assets, “Gift for $5,000”

Scenario 2 – (gift funds and borrower’s own funds being used in transaction)
Gift amount: $5,000

Common submission problem:

  • Checking account has $7,000 in total – including the gift.
  • Source of down payment submitted as “checking and savings account.”
  • Asset submitted as “checking account”:
    • Financial institution with $7,000 AND
    • Miscellaneous asset, “Gift from relative of $5,000”
  • When ran this way, the gift is put through twice and assets are overstated by $5,000.

Correct submission practice:

  • Source of down payment should be submitted as an “FHA Gift from relative $5000.”
  • Since the gift fund is already in the Borrower’s bank account, DU should be submitted as “checking or savings” in ABC account in the amount of $7,000. DU will recognize that $5,000 of the $7,000 in the account is from a gift. 
Scenario 3 – (gift funds and borrower’s own funds being used in transaction)
Gift amount: $5,000Correct submission practice:
  • Checking account currently has $2,000. The $5,000 gift will be wired to the title company.
  • Source of down payment submitted as “checking and savings account.”
  • Asset submitted as “checking account:”
    • The financial institution with $7,000, AND
    • Miscellaneous asset, “Gift from relative of $5,000.”

Correct submission practice:

  • Source of down payment should be run as “FHA Gift from relative $5,000.”
  • Since gift funds will be provided to the title company and not the borrower:
    • DU should be submitted as checking or savings in ABC account in the amount of $2,000, AND
    • Miscellaneous assets, “gift funds as $5,000.”

 

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