When a home mortgage is in your future, chances are you’ve been thinking about your down payment. The down payment is the amount the homebuyer is able to put down against the loan. If you’re able to put down more than 20% of the home’s purchase cost you don’t have to carry mortgage insurance.

According to D. Shane Whitteker, owner and chief broker at State College based Principle Home Mortgage, one way that some home buyers get their down payment is through a gift.

“Gifted down payment and sometimes closing costs are fairly common in the mortgage market,” Whitteker says. “It is important to understand how to accomplish this in a manner that will not cause complications with mortgage qualification.”

Whitteker recommends the following checklist to make sure you’re complying with all the guidelines to ensure proper processing of the gifted down payment. Of course, whether you’re in State College or anywhere else, nothing can take the place of speaking with a qualified mortgage broker.

1) The gift must be documented properly. Typically the bank will require the donor to show proof of where the gift is coming from, i.e. a bank statement showing the transfer and the available funds to make this happen. You will also need to show the money being deposited into your account.

According to Whitteker, there needs to be a clear trail to follow that shows where the gift came from.

“If the money was given as a check, a copy of the check will be necessary as well,” Whitteker says. “Most banks will also allow the gift to be sent directly to the title company or closing attorney. It is important to discuss your options with whatever mortgage broker or bank you are dealing with.”


“If the money can’t be documented you can’t use it,” Whitteker says. “Banks require that the gift be documented.”

3) The gift must be accompanied by a gift letter guaranteeing the transfer of money is actually a gift and not a loan.

“It is mortgage fraud to lie about this so don’t do it,” Whitteker says.

4) Again, always check with your mortgage broker or bank to make sure you are following their gift guidelines. According to Whitteker there can be differences in guidelines depending on the lender.

“Banks are able to set their own requirements above and beyond agency guidelines,” Whitteker says.

It is very important to discuss this with your State College mortgage professional. Feel free to contact State College based Principle Home Mortgage to discuss this or any other mortgage issues in more detail.