Are you Commingling? Mortgage Definitions

Commingling can take several different forms and meanings so we are going to focus on the root of the word. According to Wikipedia, Commingling literally mean “mixing together.” This is a common concern in the Real Estate world when it comes to collecting Earnest Money deposits and such. Taking a clients money and mixing it with your own personal funds is illegal. Financial advisors and attorneys also run the risk of serious legal action if they were to commingle funds.

It is when a fiduciary mixes funds that he holds in care of the client with their own funds. This makes it difficult to determine who’s funds are who’s and in the case of financial investment how to distribute gains.

For the purposes of this blog I wanted to touch on Commingling from the gift perspective.  As FHA continues gain steam as one of the premier financing tools for a home purchase so does gift for down payment. The Paper trail of the gift is extremely important and must be consistent throughout. For Example: Your aunt has agreed to give you $5000 for the use toward your purchase. Your aunt must show she has the ability to give the money via a bank statement, evidence the withdrawal from that account, show the cashiers check and the borrower must provide a statement receiving the funds. The cashiers check and the deposit into the borrowers account must match. Many times clients take the Cashiers check from the aunt and Commingle the funds with another small deposit. Now the paper-trail of the gift does not match across the board. If the additional funds were case they are hard to track.

Commingling could cost you time and anxiety in your purchase transaction if you do not pay attention.