Jeff Cost

Cincinnati Home Loan

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Ensure a Stress-Free Home Purchase with These Gift Fund Tips

February 6, 2025 by Jeff Cost

Imagine you are about to purchase your dream home, and a generous financial gift from family or friends is making it possible. It’s a moment to celebrate!  But did you know that mishandling gift funds can lead to delays, added stress, or even jeopardize your loan approval?

Don’t worry, we are here to guide you through the process! Let’s explore the top mistakes homebuyers make when receiving gift money and how to avoid them.

1. Skipping the Lender Consultation

Before accepting any funds, consult your lender. Gift money rules vary by loan type, and your lender will ensure the funds are eligible and compliant with regulations. Skipping this step could result in complications or even a denied loan application.

2. Failing to Document the Gift Properly

A gift without a paper trail is a red flag to lenders. They need proof that the money is a gift—not a loan. Typically, this involves:

  • A signed gift letter stating the amount and confirming no repayment is required.
  • Documentation of where the funds came from, such as a bank statement or canceled check.
  • Proper documentation prevents delays and provides transparency during underwriting.

3. Overlooking Tax Implications

Did you know that gift money can have tax consequences? In 2025, the annual gift tax exclusion is $17,000 per recipient. If the gift exceeds this amount, your family member may need to file a gift tax return. Make sure everyone involved understands the tax rules to avoid surprises.

4. Using Digital Payment Apps

Convenient payment apps like Venmo or Zelle might seem like a quick way to transfer funds, but they lack the paper trail required by lenders. Opt for more traditional methods like a wire transfer, electronic funds transfer (EFT), or a check. These methods ensure verifiable records that meet loan requirements.

5. Spending Every Penny Without a Cushion

It’s tempting to allocate the entire gift toward your down payment, but leaving yourself financially stretched isn’t wise. Reserve some funds for early mortgage payments or unexpected expenses during your first months as a homeowner. A financial cushion ensures peace of mind and stability.

Keep Communication Open

The key to handling gift money correctly is open communication. Keep your lender, donor, and real estate agent informed throughout the process to ensure everything is handled smoothly.

Gift money can be a wonderful way to achieve your homeownership dreams, but only if it’s managed correctly. By avoiding these common pitfalls and following your lender’s guidance, you’ll set yourself up for success and a stress-free journey to closing day.

Ready to make your dream home a reality? I’m here to help you navigate the process from start to finish. Reach out today!

Filed Under: Home Mortgage Tips Tagged With: Gift Funds, Home Buying Tips, Mortgage Advice

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Jeff Cost
Sr. Loan Officer

Cincinnati, OH Mortgage Lender
NMLS# 21688


jeffrey.cost@ccm.com

Call (513) 403-6260
Fax (941) 567-5222

Cross Country Mortgage

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