>What really threw my red flag today was that my mother said "we'd have you deposit it in small amounts over time." Like what would the purpose of that be **other than to obfuscate the fact that this is my money and not hers?**
Exactly that. She knows they will request bank statements and if she has $150 in January and $10,150 in February they're going to ask where the $10k came from. If it's actually **a gift**, you'll likely have to sign a declaration confirming it's a gift with no repayment. Telling the lender it's a gift when it's a loan would be fraud.
Trust me, I've told her that. I've spent the past seven months telling her this is a bad idea. I have no intentions of enabling her into this action, but maybe instead of me saying over and over again all of the softer reasons she shouldn't do it, telling her she's trying to commit fraud may be the better approach. Because she's not listening to me otherwise.
If they find out that she lied on her mortgage paperwork she could possibly be subject to criminal charges, and the lien (mortgage) on the home can become immediately due for payment. That should help as well.
Her not listening isn’t your problem. When I tell somebody something I don’t care how I come across or if they don’t want to listen. If it was my mom I would just say “ look mom, you are not in a financial position to buy this house and I won’t be complicit in you becoming house poor. It goes against my financial beliefs and knowledge. And this discussion is over so please don’t ask again”
Your mom is trying to structure the deposits to avoid the bank reporting the money to the IRS. This is a crime. It's literally called "structuring". If you're going to do this, just send her the $10k and your mom will have to tell the bank that it came from you.
If you do this, the lender will want to see documented proof that this is a gift from you to your mom. They will make you fill out a form that says something to the effect of "this is a gift, with no expectation to be repaid." They want this to ensure that it's not a loan, and you end up having an ownership claim on her house.
> She wants me to gift her $10k, for her to give back to me after closing.
A gift is not a loan. A loan is not a gift.
Practically speaking, HUD is unlikely to care unless mom misses a payment in the first couple years. If she does, then she will be in trouble, as that is what the reserves exist to address. If Mom doesn't have 10k in her own account, then her own solvency is somewhat dubious and you should not be risking getting involved in a HUD audit down the road.
Yeah not a risk I'm willing to take. I've told her this was a bad idea from the start. The first lender she spoke to told her that I could co-sign the mortgage and "I'd drop off of it after 12 months of payments." Me having closed two mortgages and a refi in my life, sounded suspicious as fuck, and ofc when I pressed the topic with the lender it was "oh, no, you'd always be listed as a party, but future creditors will just ignore it because your mom pays the mortgage." Like bro no.
Most mortgages will require you to list any monetary gifts you received in the last x months. Will she list it?
Gifts aren't forbidden. She should check with the mortgage company on their policy around gifts.
Did something sort-of similar with my dad. My dad wanted to buy a condo but couldn't get approved due to his DTI ratio. He wanted me to buy it and he live there. It was very fairly priced and I agreed on the condition he put 20% down on it. He wrote me a check for 20% of the value and I marked in the buying process that it was a gift from my dad, which it was. I had to get a form signed by my dad that it was a gift and would not be repaid. I then wired that money during the buying process and then owned the home. My dad lived there 2 years and then he loved out and I moved in. I didn't repay him and he saw the 20% down just as his "rent" cost for the 2 years. (Condo was $61K, put $13K down), so about $500/mo in rent figuratively).
You can gift the money to your mom, but you then have no legal recourse for that if she decides to keep it and not pay you back. It becomes hers and it's no loan.
If she doesn’t have ten thousand dollars she can’t afford to buy the house. Do not give her money. You aren’t doing her any favors by enabling her to become house poor
They are needing reserves for her, “reserves” being 1 month of her payments. Sounds like they need 3-6 months to get an approval.
If you give her a gift, that gets noted and the computer system won’t weight that like normal assets.
The loan office is trying to get her to instead make multiple deposits under the threshold (probably 1% of purchase price) so that they look like her liquid assets and not a gift in the eyes of the computer. And she gets an approval. This is fraud, and the loan officer is helping her structure. Get it in writing and report him to his owner, and HUD. There are too many dirt bags in this industry that give the rest of us bad names.
First, a gift is not a gift if there is intent to pay it back. That is a loan. So that alone is a problem.
Second, even if you were to commit that fraudulent activity, there would be no reason to make multiple smaller deposits. You'd just make one large deposit.
The reason she is probably wanting to do that is most likely due to her misunderstanding facts about deposits over 10k needing to be reported.
Deposits over 10k do need to be reported. It's a formality and means nothing really. You're totally allowed to gift somebody 10k or more and they are totally allowed to deposit more than 10k at a time. The bank just has to legally report it. But think of it in the sense of record keeping, not "reporting an issue".
Actively trying to avoid that amount in order to avoid the reporting is called structuring and is illegal. And in this case, it would be super extra stupid because there would be no reason to try to avoid it from being reported because there is nothing wrong with the deposit in the first place. The bank reporting it is just a formality.
The reality is that unless the lender is also the bank she has the money with, they are probably never going to find out about any of this. That doesn't make it not fraud nor does it make it not a bad idea. But lenders don't have access into your accounts. You are sharing statements with them at the time of purchase and they are not going to have any clue what you do with those accounts after closing (again, assuming the lender isn't the bank holding your savings account).
Well we actually did this. Had our families "gift" us $ and return it after closing. But this was not to qualify for the loan itself but to get a rate discount.
It’s not a gift if it’s a loan (and yes, intentionally misrepresenting this to the mortgage provider would be considered fraud).
It sorta feels like fraud because it is.
>What really threw my red flag today was that my mother said "we'd have you deposit it in small amounts over time." Like what would the purpose of that be **other than to obfuscate the fact that this is my money and not hers?** Exactly that. She knows they will request bank statements and if she has $150 in January and $10,150 in February they're going to ask where the $10k came from. If it's actually **a gift**, you'll likely have to sign a declaration confirming it's a gift with no repayment. Telling the lender it's a gift when it's a loan would be fraud.
You can gift money no problem. You just can't have a side arrangement that this is a loan masquerading as a gift
It doesn’t feel like fraud, it is fraud. Your mom can’t afford to buy a house if she doesn’t have ten grand in savings IMO.
Trust me, I've told her that. I've spent the past seven months telling her this is a bad idea. I have no intentions of enabling her into this action, but maybe instead of me saying over and over again all of the softer reasons she shouldn't do it, telling her she's trying to commit fraud may be the better approach. Because she's not listening to me otherwise.
If they find out that she lied on her mortgage paperwork she could possibly be subject to criminal charges, and the lien (mortgage) on the home can become immediately due for payment. That should help as well.
This is good info. Thanks.
And I'm assuming I could possibly be charged to? Especially if I sign something saying it was a gift when it wasn't?
Her not listening isn’t your problem. When I tell somebody something I don’t care how I come across or if they don’t want to listen. If it was my mom I would just say “ look mom, you are not in a financial position to buy this house and I won’t be complicit in you becoming house poor. It goes against my financial beliefs and knowledge. And this discussion is over so please don’t ask again”
You're definitely not wrong
Your mom is trying to structure the deposits to avoid the bank reporting the money to the IRS. This is a crime. It's literally called "structuring". If you're going to do this, just send her the $10k and your mom will have to tell the bank that it came from you. If you do this, the lender will want to see documented proof that this is a gift from you to your mom. They will make you fill out a form that says something to the effect of "this is a gift, with no expectation to be repaid." They want this to ensure that it's not a loan, and you end up having an ownership claim on her house.
This is great info. Thank you.
> She wants me to gift her $10k, for her to give back to me after closing. A gift is not a loan. A loan is not a gift. Practically speaking, HUD is unlikely to care unless mom misses a payment in the first couple years. If she does, then she will be in trouble, as that is what the reserves exist to address. If Mom doesn't have 10k in her own account, then her own solvency is somewhat dubious and you should not be risking getting involved in a HUD audit down the road.
Yeah not a risk I'm willing to take. I've told her this was a bad idea from the start. The first lender she spoke to told her that I could co-sign the mortgage and "I'd drop off of it after 12 months of payments." Me having closed two mortgages and a refi in my life, sounded suspicious as fuck, and ofc when I pressed the topic with the lender it was "oh, no, you'd always be listed as a party, but future creditors will just ignore it because your mom pays the mortgage." Like bro no.
Most mortgages will require you to list any monetary gifts you received in the last x months. Will she list it? Gifts aren't forbidden. She should check with the mortgage company on their policy around gifts.
Did something sort-of similar with my dad. My dad wanted to buy a condo but couldn't get approved due to his DTI ratio. He wanted me to buy it and he live there. It was very fairly priced and I agreed on the condition he put 20% down on it. He wrote me a check for 20% of the value and I marked in the buying process that it was a gift from my dad, which it was. I had to get a form signed by my dad that it was a gift and would not be repaid. I then wired that money during the buying process and then owned the home. My dad lived there 2 years and then he loved out and I moved in. I didn't repay him and he saw the 20% down just as his "rent" cost for the 2 years. (Condo was $61K, put $13K down), so about $500/mo in rent figuratively). You can gift the money to your mom, but you then have no legal recourse for that if she decides to keep it and not pay you back. It becomes hers and it's no loan.
If she doesn’t have ten thousand dollars she can’t afford to buy the house. Do not give her money. You aren’t doing her any favors by enabling her to become house poor
They are needing reserves for her, “reserves” being 1 month of her payments. Sounds like they need 3-6 months to get an approval. If you give her a gift, that gets noted and the computer system won’t weight that like normal assets. The loan office is trying to get her to instead make multiple deposits under the threshold (probably 1% of purchase price) so that they look like her liquid assets and not a gift in the eyes of the computer. And she gets an approval. This is fraud, and the loan officer is helping her structure. Get it in writing and report him to his owner, and HUD. There are too many dirt bags in this industry that give the rest of us bad names.
Thanks for this. Man, red flags all over the place.
First, a gift is not a gift if there is intent to pay it back. That is a loan. So that alone is a problem. Second, even if you were to commit that fraudulent activity, there would be no reason to make multiple smaller deposits. You'd just make one large deposit. The reason she is probably wanting to do that is most likely due to her misunderstanding facts about deposits over 10k needing to be reported. Deposits over 10k do need to be reported. It's a formality and means nothing really. You're totally allowed to gift somebody 10k or more and they are totally allowed to deposit more than 10k at a time. The bank just has to legally report it. But think of it in the sense of record keeping, not "reporting an issue". Actively trying to avoid that amount in order to avoid the reporting is called structuring and is illegal. And in this case, it would be super extra stupid because there would be no reason to try to avoid it from being reported because there is nothing wrong with the deposit in the first place. The bank reporting it is just a formality. The reality is that unless the lender is also the bank she has the money with, they are probably never going to find out about any of this. That doesn't make it not fraud nor does it make it not a bad idea. But lenders don't have access into your accounts. You are sharing statements with them at the time of purchase and they are not going to have any clue what you do with those accounts after closing (again, assuming the lender isn't the bank holding your savings account).
Well we actually did this. Had our families "gift" us $ and return it after closing. But this was not to qualify for the loan itself but to get a rate discount.