Yes, VA loans do allow gift funds, but there are specific rules and guidelines to follow.
Gift funds can be a great way for homebuyers to get some help with their down payment or closing costs. If you’re a veteran or active-duty service member considering a VA loan, you may be wondering if you can receive gift funds to help with these expenses.
According to the Department of Veterans Affairs (VA), gift funds are allowed for VA loans, but there are some guidelines that must be followed:
1. The gift must be from an acceptable source. The gift can come from a relative, fiancé or domestic partner, or a close friend with a “clearly defined and documented interest” in the borrower. The gift cannot come from anyone who has an interest in the sale of the property, such as the seller, real estate agent, or builder.
2. The gift must be properly documented. The donor must provide a gift letter that includes their name, address, telephone number, and relationship to the borrower. The letter must state that the funds are a gift and do not need to be repaid. The letter must also include the amount of the gift and the date it was given.
3. The gift cannot be used for certain fees. Gift funds can be used for the down payment and closing costs, but they cannot be used for things like prepaid taxes, insurance premiums, or initial funding fees.
4. The borrower must have sufficient reserves. The borrower must have enough money in their own accounts to cover at least one mortgage payment after the gift funds are used.
It’s important to note that these guidelines are subject to change, so it’s always a good idea to check with your lender to make sure you’re following the most up-to-date requirements.
One more thing to keep in mind is that while gift funds can be a great way to get into a home with little or no money down, it’s important to make sure you can afford the monthly mortgage payments and other expenses that come with homeownership.
At Mortgage Brokers Pro , we specialize in VA loans and can help guide you through the process of using gift funds. Our experienced loan officers will work with you every step of the way to ensure a smooth and stress-free experience. Contact us today to learn more about how we can help you achieve your homeownership goals.