FHA Gift Funds Rules
Buying your first home is a family affair. FHA loans allow 100% of your down payment and closing costs to come from a family gift. Here is how to do it right.
The Short Answer
FHA allows gifts from family members, close friends with a documented interest, or employers. You need a signed Gift Letter stating the money is a gift, not a loan, and proof of the transfer.
The Real Problem
The "Paper Trail." If you deposit cash from a relative without a trail, an underwriter cannot use it. NEVER deposit gift funds into your account until you have spoken with your loan officer about the required documentation.
What Must Be in the Gift Letter?
- Donor's name, address, and phone number.
- Donor's relationship to the borrower.
- The exact dollar amount of the gift.
- A clear statement that no repayment is expected.
Gift Funds Decision Framework
The Best Way to Transfer:
Direct to Escrow
The donor wires the money directly to the title company. This is the "cleanest" way and requires the least amount of donor bank statements.
Donor to Borrower
The donor gives the money to you first. This requires "sourcing" the funds, meaning the donor may have to provide 30 days of their own bank statements.