How To Paper Trail Your Down Payment Gift For A Home

A proper cash gift paper trail includes a documented withdrawal, a documented deposit, and a letter signed by all parties.
Buying a home and getting a cash gift for down payment? Build a digital paper trail.

According to the National Association of REALTORS®, last year, more than 25 percent of home buyers under the age of 38 received at least some cash from family or friends that they used to make a down payment.

Receiving cash isn’t a problem; lenders don’t mind when buyers get gifts.

Lenders have concern is that the “gift” you’re getting isn’t actually a gift; that everybody’s lying and the gift is actually a loan that you’ve agreed to pay back.

Gifts that are really loans affect your ability to get mortgage-approved.

Lenders are also concerned that the cash gift is coming from an illegal transaction of some sort. They worry that the real estate transaction is being used to launder the cash gift; to make the “dirty money” look clean.

These are two specific concerns about cash gifts, and to squash them, lenders just ask for two specific things:

  1. A paper trail showing withdrawal and deposit slips from the giver and receiver of the gift
  2. A signed statement attesting that the gift is an actual gift

The documentation is straight-forward, and simple to collect. Without it, though, your lender will declare your gift ineligible for use with your purchase.