When is gift money no longer a gift?

8 Replies

Hoping I can get a clear answer on this. Thanks in advance.

I am trying to get a 25% conventional mortgage on a duplex that costs $80K. The bank is telling me the down payment can’t be gifted. I have a substantial amount of gift money being deposited into my account soon. I want to use that money to purchase properties. 

Some fellow investor friends of mine are telling me I have to wait 2 years before the gift money is no longer seen as a gift by the bank. Others are telling me I can just let the money season in my account for 2-3 statement cycles. Even two different accountants gave me different answers.

Anyone know how long I’ll have to wait?

Well, it can vary depending on the bank. Also, keep in mind that when an accountant talks about gift money, they are, thinking about it from a tax perspective rather than a lending requirement. But generally, it's a 60 day seasoning period to not have to consider it a gift. In reality, if you can show two consecutive bank statements with the money in that account (not including the actual deposit) then it is considered "seasoned" rather than being gift funds. Many banks would also be fine if for instance, you showed a deposit on March 15th and still showed that money in there on May 17th. But it's simpler if you have two months of statements that don't show the deposit but just show the money in the account. Otherwise it can prompt underwriting to ask the source of funds. Hope that helps.

Originally posted by @Jaimyn Chang :

Hoping I can get a clear answer on this. Thanks in advance.

I am trying to get a 25% conventional mortgage on a duplex that costs $80K. The bank is telling me the down payment can’t be gifted. I have a substantial amount of gift money being deposited into my account soon. I want to use that money to purchase properties. 

Some fellow investor friends of mine are telling me I have to wait 2 years before the gift money is no longer seen as a gift by the bank. Others are telling me I can just let the money season in my account for 2-3 statement cycles. Even two different accountants gave me different answers.

Anyone know how long I’ll have to wait?

 Once it has been in your checking/savings account for two statement cycles, no one will question where it came from. 

This isn't really a question for an accountant. Accountants and lenders have, at best, a love/hate relationship. Both, respectively, frequently get things wrong when they "step out of their lane" and answer questions best put to the other profession. This is an example of that.

I'm in the same boat. A lender I'm working with told me if he doesn't see the deposit on the two bank statements I submit to him, he won't ask where the funds came from and assume it's been in my account all along. I've read several posts from people discussing the ethics of this (as well as the potential ramifications), but my guess, like others have mentioned, is it will vary between lenders. Good luck!

Originally posted by @Travis Henry :

I'm in the same boat. A lender I'm working with told me if he doesn't see the deposit on the two bank statements I submit to him, he won't ask where the funds came from and assume it's been in my account all along. I've read several posts from people discussing the ethics of this (as well as the potential ramifications), but my guess, like others have mentioned, is it will vary between lenders. Good luck!

 Thanks man. I just don't see what sort of negative ramifications could come from this lol. I think it's kind of a silly stipulation, although I understand lenders want to cover their backs.

@Jaimyn Chang I don't want to speak on behalf of anyone in the post I was referencing, but I think it had more to do with the fact that it's technically mortgage fraud to use gift funds for an investment property; even with the two months of seasoning, if there's no intention on repaying the funds, then it's still technically a gift. However, my argument would be that at some point, a line would need to be drawn as to when the funds would no longer be considered a gift and become your funds.

I've reached out to several lenders with this question and they all seem to agree that the 60-day seasoning period (two bank statements) is sufficient.