VA LOAN CAPTAIN BLOG & Learning Center

Gifts Are Easy

By: Grant Moon 08/08/14 11:18 am

It takes very little from the veteran when financing a home purchase with a VA loan. Because there is no down payment requirement VA loans have an advantage that conventional loans can’t match. And with regard to closing costs certain fees sometimes referred to as “non-allowables” cannot be paid for by the veteran. Most of these non-allowable fees are lender-generated such as Loan Processing fees or Underwriting Charges. The veteran saves still more money. But sometimes that’s not enough and the borrower needs a bit more to close.

For example, the veteran will need a full year’s home owner’s insurance policy paid for at settlement in addition to setting up impound or escrow accounts. There’s an appraisal fee, a credit report and others that must be addressed. In many instances, the seller can pay for these fees expressed as a seller credit. But the seller may not be so inclined. The lender can offer a credit but again sometimes adjusting the interest rate on a loan to fund a lender credit doesn’t work out. But the borrower can still receive a cash contribution as a gift.

VA loans are less-stringent when it comes to documenting gift funds. The donor must be a family member or acceptable non-profit. The VA lender will want to see a paper trail of the gift funds but this can be nothing more than a simple copy of the cancelled check, both front and back. Note that it can take a few days to produce a check that’s been cancelled so make sure the gift funds are delivered to you well before your scheduled closing date.

Along with the cancelled check should be written documentation regarding who gave the funds and repayment of the gift is not expected at all. There really isn’t any published limit on how large the gift may be but given that VA loans require much less from the borrower at the outset, the gift is usually relatively small. Gifts aren’t needed very often with VA loans but when they are they’re easy to process.

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