Kentucky USDA Mortgage Guidelines for Gift Funds and Gift Of Equity.
Guidelines - Personal Gift Funds
• Gift funds may not be used as reserves.• Gift funds are considered the applicant's own funds and are eligible to be returned to the
applicant at loan closing as applicable.
• Cash on hand is not an acceptable explanation for the source of funds.
• Gift funds that will be used for funds to close may be entered in the "Other Credits"
section of the
• "Transaction Details" GUS application page. The amount entered should not exceed the actual
amount. of funds required to close. Remaining gift funds not used for closing assistance may be
entered in the "Asset and Liabilities" application page as "gift funds".
If cash back is received at loan closing, it cannot exceed monies advanced by the borrower minus
utilized gift funds.
Documentation - Personal Gift Funds
Gift letter - Gift funds must be properly sourced:• If the funds have been deposited to the borrower's account, obtain a gift letter to state
the funds do not have to be repaid and bank statement as evidence of funds from the donor's
account.
• If the funds have not been deposited in the borrower's account, obtain a gift letter to
state the funds do not have to be repaid, a certified check, money order, or wire transfer and a
bank statement showing the withdrawal from the donor's account.
• If the gift funds will be sent directly to the settlement agent, the lender must obtain a
gift letter to state the funds do not need to be repaid and verify the funds have been received by
the settlement agent by the donor.
Guidelines - Gift of Equity
• These gifts should be applied as a reduction to the purchase price of the dwelling.• Ensure the appraiser is aware of the gift. This will allow them to properly complete their
appraisal report, note the reduction, and support the appraised value compared to purchase price if
applicable.
The borrower may not receive cash back at loan closing for these gifts.
