Seasoning borrowed money

34 Replies

@Frank Leone in California season is 3-6 month of sitting in the bank. If someone “gifts” you the money, they can right a letter to that end and verify their funds then the money doesn’t need to be seasoned in your account.

How does it work if you have a business partner?  I have a friend that wants to get involved, more so as an investor than actually putting in the sweat. He’s got $x he wants to invest, not as a loan to repay but as a way to get a percent of the monthly rental cash flow. How would that work?

@Frank Leone is there any chance your friend could joint venture with you and be a part of the entire process? Of course, I assume they would then be on all the paperwork attached to the house...at least until the two of you agreed he/she would be removed and you would assume full ownership. Essentially, they would be a co-applicant and co-Owner. Not sure if this is an option or makes sense to do.
@Frank Leone The difference between receiving a gift and borrowing money from a friend is simple. There is no expectation that you repay the gift. However, if you borrow money from a friend (which is what your original post was asking about) there is an expectation that you will have to repay the debt. This could affect your ability to repay your mortgage loan so the lender wants to know about these kind of debts. It also will impact your debt to income ratio which is a matrix that underwriters use to qualify your loan. Not disclosing a debt on your application is a crime. Even if the money is “seasoned”. If the money is a gift then the person that gave it to to you can sign a statement to that effect and the lender more than likely would allow you to use those funds towards your down payment.

On FHA loans, is required 2 months bank statements but Freddie Mac HomePossible with 5% down on a multiunit require only 1 month bank statement. All deposits over 50% your monthly income need to be sourced, you can make some small deposits or yes you can use gift funds, bear in mind that most lenders will require proof money came from donor acct to you and that donor had the funds before he gifted, basically you cannot have a similar deposit few days before the transfer as we require a bank stm from the donor. However, gift funds can only come from a relative, and not all relatives qualify.... btw, often I have buyers that only bring the 3.5% downpayment and closing costs come from seller concession. The only way to bring slightly less than the 3.5% downpayment is to include the prorated taxes at the start at the file, that's the only credit that can be applied towards the downpayment.

@Frank Leone

Even though some of the people grilled you on your question, I am glad you asked it!  I'm sure others with the same question will read this and learn why it's not allowed. I can't tell you how many times I get asked a similar question. It's reasonable to want to understand WHY the mortgage company is telling you no, and now you know the severity of lying on a mortgage application. 

Go back and read @Matthew Olszak  and @Diana Muresan comments. They explained this perfectly 

Also, the "mortgage rules" are not some hidden secret only the banks know. You are welcome to read Fannie/Freddie guidelines online. If you have questions, a good lender will be happy to help you.

Regarding Gift funds, get with your LO before you start moving money around. It will help alleviate some headache on both ends.