GIFT/RENT Question

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  • #42412
    Pearl609
    Member

    Does anyone know what the rules or process is if someone pays your rent for you?

    I have to go on a month to month lease (more expensive) until my property is ready and I asked my brother for some help, and after explaining the gift process with NACA (bank statements, gift letter, etc), he offered to just pay my rent for me for two months so I can save some additional money of my own.

    So while, I will be able to get rental verification that my rent was paid timely for those months, it wont show the payment on my checking account statement.

    I am 100% sure NACA will require something from me, just trying to be proactive and determine what I need for this situation?

    #42434
    southflorida
    Member

    I assume you would need at least a letter of explanation, I don’t know if they’ll require something additional

    #42488
    TTrumble
    Member

    Hello Pearl609,

    You will definitely need a Letter of Explanation describing what is going on, and your brother will also need to provide a similar LOE AND his own bank statements that show where he paid the rent for you. You are not exempted from having to prove where that rent money is coming from just because the money isn’t going through your own bank account.

    Just to help everyone understand, this is actually a legal issue. When the Dodd-Frank Act was passed in response to the economic collapse, one of the things it did was seriously tighten up anti-money laundering regulations. Long story short, you have to be able to prove that every dime is coming from a legitimate source.

    In reality, doing things the way you describe won’t be any simpler, and may actually be more likely to throw up a red flag, than if he simply wrote you a check each month that he covers your rent for you.

    Also, during the months he is helping you, your required Payment Shock Savings will automatically be 100% of your desired mortgage payment.

    Your brother is being wonderfully generous in helping you become a homeowner, but you might want to consider sitting down and re-strategizing with him. Your plan to simplify things will almost certainly backfire on you and actually make things more complicated.

    Tim Trumble
    Online Operations,NACA
    ttrumble@naca.com

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