Understanding how FHA gift funds can be used, can help clear up confusion for those purchasing properties with an FHA loan.
Now can FHA down-payment funds be from a gift?
The quick answer to this question is yes, your down-payment can from gift funds, however the FHA sets certain rules regarding where the down-payment can come from and who can gift you the down-payment.
Now regarding where your down payment source, the FHA and lenders will want your down payment to come from your own cash reserves, the cash you have in investments, savings bonds, or any other holdings.
Regarding who can give you a gift down-payment, the FHA will allow a gift from:
- The borrower’s relative
- The borrower’s employer or labor union
- A close friend with clearly defined and documented interest in the borrower
- A charitable organization
- Or a governmental agency or public entity that has a program which provides down payment assistance to low to moderate income families, or first time home buyers.
Now the FHA also sets rules regarding who cannot give you a gift down payment on an FHA loan. And here they are:
- The first is the seller
- The real estate agent or broker
- The builder
- Or any associated entity
One final thing I’ll add is that in order for the funds to be considered a gift, there can’t be any expected or implied repayment of the borrowed funds.