If you are receiving gift money to purchase real estate it is very important that you consult with your loan officer how to deposit that money, every penny is tracked during the loan process.
"Show me the Gift Money!"
Underwriters track gift money as well as bank deposits and/or money transfers in bank accounts during the loan approval process. The origin of the gift money and the transfer-ability of the funds from the donor's account to the buyer's account is reviewed by an Underwriter in great detail. It is imperative that you contact your lender when depositing monies into your account during the home buying process. Why you may ask?...well, any money that appears in a buyer's bank account that is not from an employee's pay check or pension; social security; foster care, etc., raises questions as to where the money came from. The buyer needs instructions from the Loan Officer before receiving any gift money from anyone as a specific procedure must be followed.
Sometimes a buyer transfers money numerous times creating a time-consuming cross-referencing of bank accounts showing the money leaving one account and being transferred into another. This often leaves a buyer frustrated as to the detailed involvement of what they consider non-problematic. When the buyer is asked for an on-line bank printout there can be no gap from the date on the last print-out or last bank statement. The amount of money transferred from the donor's account to the buyer's account must exactly match the amount that was transferred. Sometimes when trying to track the transferring from one bank account to another its revealed that a bank account is missing on the application - creating a revision to the application.
Occasionally buyers don't have auto-depositing of their payroll check. When a buyer deposits their payroll check "Less Cash" the amount will be less than the amount shown on their check stub - which raises a red flag. Since the amounts don't match, a letter of explanation may be required from the buyer. The best way to remedy this is to deposit the entire check and then withdraw the cash they need. Of course a buyer who receives a check shouldn't cash it and then try to deposit the cash in their bank account. A cash deposit in any bank account is not able to be documented and will not be considered as sufficient funds to close escrow. So if you have a garage sale use the cash to buy groceries etc.
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