With VA loan closing costs averaging between 3-5% of the loan total, you may be wondering if you can be gifted the money.
The VA home loan program boasts a ton of incredible benefits, but the two biggest might be these: Qualified borrowers don't need to put a down payment on a VA loan, and there's no cap on how much a seller can pay toward your closing costs.
Unfortunately, in terms of the latter, there's no guarantee that you'll get a seller to agree to pay all of those costs. It's certainly a common outcome, especially in a buyer's market, but every purchasing situation is different. You can roll the VA Funding Fee into the loan — or not pay it at all if you have a service-connected disability — but otherwise those costs have to be paid before the loan can close.
So what happens if you're on the hook for at least a portion of those costs?
There are a couple different potential solutions. One is that you might be able to pay those costs using gift funds from a family member or close friend.
Using Gift Funds
Gift funds are exactly what they sound like — someone gives you money with no strings attached. But there are certain rules and requirements for all loan types, from VA and FHA to USDA and conventional, when it comes to using someone else's money toward your home purchase.
VA Gift Fund Guidelines
Here's a look at some of the big requirements you'll need to verify to use gift funds on a VA home loan:
- The donor's relationship with the borrower
- The donor's name and contact information
- The date the gift is transferred to the borrower and for how much
- A written statement that repayment of the gift is not expected
- No one involved in the loan transaction, including the lender, can be the source of the funds
Can a spouse provide gift funds if they will not be part of the loan?
Yes, the VA allows gift funds to come from a spouse if they are not on the loan.
What Gift Funds Can Pay For
Gift funds can be used towards a variety of different mortgage-related expenses. The most common use of gift funds is for down payment, the VA Funding Fee or other closing costs. Gift funds can be used towards any fee related to closing the home loan.
Other Loan Types
Many of the requirements are the same for other loan types. But there are some unique differences that are important to note.
For example, you'll need to have a gifter bank statement on FHA loans. Borrowers seeking a conventional loan who can't put down at least 20 percent must have at least 5 percent of their own funds in the loan. USDA borrowers can receive gift funds from charitable organizations, nonprofits and even municipalities.
Learn more about VA closing costs and what might be possible using your VA home loan benefits -- talk with a Veterans United VA Loan Expert at 855-870-8845.
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