Using Gift Money to Buy a Manufactured Home: Questions to Ask First
A cash gift from a relative can be part of a manufactured home down payment, and it raises five questions before any money moves: whether your program accepts gifts, who is allowed to give one, what the gift letter has to say, how the money should travel from their account to yours, and when it should land. Settle them in that order. A gift that arrives before the rules are checked still has to be documented, and sometimes cannot be counted.
A gift of equity, where a relative sells you a home for less than its value, is a different thing with its own paperwork, covered in buying from a family member. This article is about money.
A gift, a loan and a gift of equity are three different things
The lender needs to know which one you have, because each is documented differently and each affects what you qualify for.
Three ways a relative can help, compared
| Cash gift | Loan from a relative | Gift of equity | |
|---|---|---|---|
| What it is | Money given with no repayment expected | Money you must pay back | A sale price below the home’s supported value |
| Who gives it | A relative or other acceptable giver | Anyone | The relative who is selling you the home |
| How it is documented | Gift letter plus transfer record | A note, and it counts as a debt | Documented in the sale and the value review |
| What it changes | Your funds to close | Your debts and your qualifying payment | The down payment and the loan amount |
A loan dressed up as a gift is the case to avoid. If money is expected back, say so, because it has to be disclosed as a debt and the gift letter would be false. There is no single down payment; it depends on the program, your credit, the home, and whether the land is leased or owned.
Five questions to settle before any money moves
Santiago Financial, Inc. keeps a gift letter among its printable forms. If the lender has a form, use it rather than writing your own, because the form asks for exactly what the file needs.
The gift letter and the transfer record have to agree
The letter says what the gift is; the transfer record proves it happened. The two are read together, so the amount, the date and the account named in the letter must match the record of the money arriving.
Documenting a cash gift
- Confirm the rules Ask the five questions above and get the lender’s letter form.
- The giver signs the letter It names the giver, the relationship, the amount, the source account and the statement that no repayment is expected.
- Transfer the money as agreed A bank transfer or a cashier’s check produces a record; cash does not.
- Keep both sides of the record The confirmation showing the money leaving the giver’s account and your statement showing it arrive.
- Send the set together Letter, transfer record and your statement, as one package, through the secure channel the lender asks for.
Timing: before the statements or after closing starts
A gift that lands in your account before you print your bank statements appears as a deposit and needs the letter and record to explain it. A gift that lands after the statements are in the file is a new deposit that has to be documented separately. Either works, as long as the paperwork travels with the money.
Some programs allow a gift to be paid directly into escrow at closing rather than into your account. Ask whether that is an option, because it keeps the gift out of your statements entirely. How other deposits are read, and what a large one needs, is in bank statements and large deposits. Whatever the route, a gift does not change the review of your income or credit, and every application is reviewed individually.
