My dad gifted me some money shortly before his passing to reduce estate taxes. Unfortunately, he passed soon after and didn’t leave a gift letter. Now the mortgage company is questioning the transfer, and getting documentation from his bank will take time as I’m waiting on probate documents.
I had enough funds in my account to cover the cash to close well before the gift was transferred, but my loan processor says my account is now ‘contaminated’ by these funds. I can provide over a year of statements showing my previous balance and its source (sale of another home).
Does what I’m proposing align with Freddie Mac guidelines? The processor referred it to her manager, but I’d appreciate any insights. Thanks!
If the gift funds aren’t necessary for closing, you could ask the lender to exclude the deposit from your documented total and just use your other funds.
Shane said:
If the gift funds aren’t necessary for closing, you could ask the lender to exclude the deposit from your documented total and just use your other funds.
Shane said:
If the gift funds aren’t necessary for closing, you could ask the lender to exclude the deposit from your documented total and just use your other funds.
We handled a similar issue this way once—it worked, but the situation was different.
Shane said:
If the gift funds aren’t necessary for closing, you could ask the lender to exclude the deposit from your documented total and just use your other funds.
Not necessarily. Lenders need to confirm it’s a gift and not a loan. If the gift can’t be documented, they assume it’s a loan and factor it into the debt-to-income ratio (DTI).
@Rin
It’s ultimately up to the underwriter. A clear explanation and supporting documents are key. However, if it even looks like a loan, the default decision will likely treat it as a liability.
If you have enough funds in your account without the gift, your processor is wrong. The gift can be excluded, and the remaining verified funds can be used for closing.
Steele said:
If you have enough funds in your account without the gift, your processor is wrong. The gift can be excluded, and the remaining verified funds can be used for closing.
The problem is, I transferred half of the gift to my sister as per my dad’s wishes. The processor says they have to exclude the entire amount, which leaves me short. Can I show that I had enough funds before the transfer?
@Rey
That complicates things. Unfortunately, you can’t use a ‘time machine’ approach. If the gift is needed for closing, you’ll have to paper-trail it. Try documenting your right to the funds through probate or show another source for the balance.
First, don’t call it ‘laundered money.’ That’s a serious legal term, not a joke.
Second, write a letter explaining that the funds were a gift from your father, attaching a death certificate. An underwriter might accept this as proof. Their concern is whether the funds are a loan, but since your father is deceased, repayment is unlikely.
@Teo
I already tried that. They want documentation from my dad’s bank, which I can’t get until probate is settled. The bank froze the account after his death.
If possible, get another gift from a family member. Gifts must be sourced, and if you can’t access the original account, the funds won’t meet guidelines. I’m sorry about your loss.
Do you have a retirement account? If it’s over 120% of the needed cash to close, you can use it to get approved without touching the ‘contaminated’ funds.
Nico said:
Do you have a retirement account? If it’s over 120% of the needed cash to close, you can use it to get approved without touching the ‘contaminated’ funds.
I do, but how does that work if I don’t liquidate it? I’d still need the cash from the other account to close.
@Rey
You don’t need to liquidate it. If your retirement account covers 120% of what’s needed, it satisfies the requirement for assets. You can use other funds at closing without them needing to be sourced.