Home Loans for Newlyweds: Using Gift Funds for a Down Payment

The average cost of a mortgage down payment for a first-time buyer is approximately 7% of the total property cost, according to a recent report by the National Association of Realtors. 

Zola and The Knot, two popular wedding registry websites, confirmed that an increasing number of couples are using their registry to help raise funds for housing costs. Three quarters of couples using Zola ask for money, and The Knot has seen an 80% increase in the amount contributed to housing this year. 

"The savvy couples now know that they can use their registries to put down that cash for their future home," Esther Lee, deputy editor at The Knot, told the Financial Times. "With everything that we've experienced when it comes to inflation and the housing market, people are really reflecting on how they want to use their registry."

Using Cash Gifts Towards a Down Payment

Cash received as a wedding gift can be used towards a down payment for conforming (Fannie/Freddie) loans. A great benefit for newly married homebuyers, these gifts can often be used without an extensive paper trail or gift letter normally associated with similar down payment gifts. 

Newlywed borrowers must keep three main points in mind:

• The purchase must be for a primary residence 
• Funds must be deposited into the borrower’s account within the first 90 days of marriage
• Proof of the marriage and reasonable documentation of the gifted funds must be provided 

Fannie Mae Guidelines 

If funds from a large deposit are used for the down payment, closing costs, etc, the lender must document that those funds are from an acceptable source.

• Reasonable judgment based on the available documentation, as well as the borrower’s financial profile, may be used to verify the funds.
• Examples of acceptable documentation include written explanations and wedding invitations to support receipt of gift funds. 

If the large deposit cannot be documented, verified funds must be reduced by the deposit amount. The lender must then confirm that the remaining funds are sufficient. 

If a deposit has both sourced and unsourced portions, only the unsourced portion will be used to calculate whether or not it is considered a large deposit. Fannie Mae defines a large deposit as 50% or more of a borrower’s qualifying monthly income. 

Freddie Mac Guidelines 

Gift funds received as a wedding gift from related and/or unrelated individuals are an eligible source of funds. The mortgage must be for a primary residence. 

Gift funds must be deposited to the borrower’s account within 90 days of the marriage license or certificate date. Borrowers must also provide the following:

• A copy of the marriage license or certificate
• Verification of the gift funds within the borrower’s account 

Closing Thoughts 

Using gift funds for a down payment have become an increasingly popular route for newlyweds looking to purchase a new home. Speak with your trusted lender today to determine the best route for your unique financial circumstances.