Can closing costs be gifted?

12 Replies

When buying an investment property can closing costs be gifted as long as the 20% down is my money?

I live in michigan. Not sure if that's relevant.

There shouldn't be a problem with this, although you would want to check with your lender to make sure that this isn't a problem. You should also make sure to get a letter from the gift-giver stating that it is a gift. Closing costs shouldn't be very high, but you also need to make sure that you comply with any and all gift tax laws that apply.

It would only be a gift of 2000, so it doesn't appear to exceed the gift tax exclusion amount of 14k for 2014. I think I'm good there.

My mortgage lender is telling me differently though. She says all of the closing cost need to be my own money as well as the 20% down. I'm just not sure why she is telling me this when every where I am researching is telling me that closing costs can be gifted, whether for an investment property or not.

Andrea,

If this a conventional loan no gift is allowed under any circumstances period. If it's private money or a HML lender then the rules might be different.

Now if a family member or whoever gives you 10K and it's been sitting in YOUR account for 60 plus days then you're golden.

Remember that you're also going to need to show 6 months of reserves for the each investment home and 2 months for your primary.

I hope this helps and have a great day :)

Someone should put a sticky thread to link to the Fannie Selling guide. This is the comprehensive guide to any and all underwriting guidelines for originators delivering to Fannie. Also, the "Fannie eligibility matrix" will outline how many months reserves you will need. To say 6 months PITI is required for investment doesn't consider any nuances like LTV and FICO; the Fannie matrix is your authority here.

Account Closed 

Did your appraisal come in lower?  I'm wondering why the closing costs aren't being rolled into your new loan?  The Loan officer should have padded your loan amount to include the fees and an additional 2k max.

Post an update on that and I'll try and figure out a solution that you can suggest to your broker or LO.

I hope this all helps and have a good night everyone. 

We have bought 2 investment homes. The money has all had to come out of our pocket no gifts allowed. Also each brokers office have their own rules. just as an fyi.

Take a look at this link....I don't know the exact circumstances of your gift, but it should not be an issue in most cases...you can only have a percentage of the down payment come as a gift, and some lenders have overlays....so that may be the issue. I have been in mortgage lending for 8 years, and have not had issues making a gift fund work, but I let my customers know up front what they can have contributed.......https://www.fanniemae.com/content/tool/selling-guide-quick-links.pdf

@Account Closed We did not get an appraisal yet. I didn't wanna go that far in the process without having the correct funds so
I didn't waste any if my money in the process.

This guide seems like it may be very helpful. I'm glad it was pointed out to me!

Shaun Weeks We did not get an appraisal yet. I didn't wanna go that far in the process without having the correct funds so
I didn't waste any if my money in the process.

This guide seems like it may be very helpful. I'm glad it was pointed out to me!

Sorry Shawn- it wasn't meant to be a personal attack. I see you are a loan officer so maybe I should have been a bit more delicate in my comment. The eligibility matrix shows various categories based on LTV and FICO. To say 6 months is not accurate- are we looking at the same matrix? If for instance, the borrower was going up to 45 percent DTI and they were between 680-700 FICO and >75LTV wouldn't the required reserves be 12 months PITI according to the matrix? Just pointing out a one size fits all answer probably wasn't appropriate to describe underwriting requirements without more details.

Elizabeth C. -"Also each brokers office have their own rules. just as an fyi"

Learning the basic concepts and becoming familiar with DU underwriting with Fannie will help any investor when dealing with conforming products and national lenders. I use the selling guide on a regular basis to research current or prospective purchases.

It might be helpful in clarifying a few points that may contribute to your general misunderstanding. Unless you are a portfolio lender, all conforming loans are underwritten using desktop underwriter (DU) or desktop originator (DO). Banks use these engines to confirm eligibility for delivery to Fannie Mae using the underwriting guidelines outlined in the selling guide. With the exception of some overlays by a lender, there are few deviations from Fannie underwriting guidelines.

Originally posted by @Mark D.:

Sorry Shawn- it wasn't meant to be a personal attack. I see you are a loan officer so maybe I should have been a bit more delicate in my comment. The eligibility matrix shows various categories based on LTV and FICO. To say 6 months is not accurate- are we looking at the same matrix? If for instance, the borrower was going up to 45 percent DTI and they were between 680-700 FICO and >75LTV wouldn't the required reserves be 12 months PITI according to the matrix? Just pointing out a one size fits all answer probably wasn't appropriate to describe underwriting requirements without more details.

Mark,

No worries.  I'm just saying a MINIMUM of 6 months is required which I didnt specify in my original post.  And yes It could go up as high as 12 months depending on the situation. 

At least Andrea is getting good feed back from this post and that's what we're all here for :)

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