What Louisiana Homebuyers Should Know About Using Gifts, Bonuses, or Tax Refunds for a Down Payment
Many Louisiana homebuyers rely on more than just money set aside in a savings account for their home down payment. Lenders are mainly concerned with whether down payment funds come from a legitimate source and how they affect your ability to make monthly payments.
Common sources of down payment money include personal savings, gifts from family members, bonuses or commissions from an employer, and tax refunds. All those sources are allowed, but some are viewed more positively than others.
Using Gift Funds for a Down Payment
Gift funds are one of the most common ways buyers, particularly first-time homebuyers, cover down payments. In most cases, these gifts must come from a close family member, such as a parent, grandparent, or sibling.
Lenders typically require a gift letter to confirm that the money is truly a gift, not a loan. This letter states who provided the funds, their relationship to the buyer, the amount of the gift, and that repayment is not expected. The purpose is simple: lenders need to verify that the gift won’t add another monthly payment, which could jeopardize your ability to pay the lender on time and in full.
The funds themselves also need to be traceable. This usually means showing where the money came from and when it was deposited, and whether it was transferred directly to the buyer or to the closing agent.
Documentation helps avoid confusion later in the process. Clear records reduce the chance of delays and help ensure the loan stays on track through closing.
Using Bonuses or Commission Income Toward a Down Payment
Employer bonuses and commission income can also be used for a down payment, but lenders usually want to see a pattern.
A one-time bonus may be acceptable if it has already been paid and deposited into the buyer’s account. If the bonus or commission is expected but not yet received, lenders often require proof that this type of income is regular and reliable. This may include past pay history or verification from the employer. The mortgage lender’s main concern is whether the funds are likely to be available when it is time to close.
How Tax Refunds Fit Into the Picture
Tax refunds are another common source of down payment funds, especially early in the year. Once the refund has been received and deposited, it can usually be used like any other savings.
Refunds that are expected but not yet received are typically not counted. Lenders need to see the funds in the account before they can be applied toward a down payment.
What “Seasoning” Means and When It Matters
Seasoning refers to how long money has been in a borrower’s account. Funds that have been in place for a while are easier for lenders to verify.
Recently deposited funds often require additional documentation. This includes gifts, bonuses, or large transfers made close to the time of a home loan application. Seasoning helps lenders confirm that the funds belong to the buyer and are not borrowed.
The lack of seasoning is not always a problem, but it can affect timing. Planning ahead can help borrowers avoid extra verification steps that might delay mortgage approval.
Common Issues That Can Delay Approval
Down payment funds that come from multiple sources can potentially cause delays in approval, like combining gift money with personal savings before it is documented or relying on a mix of bonuses and tax refunds that have not yet been received.
Planning Your Down Payment Ahead of Time Makes the Mortgage Approval and Closing Process Smoother
Using gifts, bonuses, or tax refunds for a down payment is common and often necessary. As long as the funds are documented and received by the time the mortgage lender is evaluating your application, those sources are usually acceptable.
Monroe-area borrowers who have questions about down payment types or required documentation can call 318.387.4592 to speak with a mortgage professional at Ouachita Valley Federal Credit Union. We’re always happy to answer members’ questions about the home loan process.
