Can My Parents Give Me the Down Payment on an FHA Loan?
By Derek Tsakiris | NMLS #1007898 | Licensed in NH, VT & ME
The short answer: Yes. FHA allows a parent to give you the money for your down payment, and the gift can cover all of it.
Three things make it count as a gift: a qualified donor, a signed gift letter, and a paper trail showing the money move from their account to yours.
Cash that can't be traced is where buyers get stuck.
I've been a loan officer for nearly 15 years, and I've watched hundreds of buyers use gift funds to get into a home.
Here in the Upper Valley, on both the New Hampshire and Vermont sides of the river, this is the question that trips people up most.
The gift itself is rarely the problem. How it's handled can be.
Who can give you gift money for an FHA loan?
FHA keeps a list of who qualifies.
A family member
Your employer or labor union
A close friend with a documented relationship
A charity
A government homeownership program
And a list of who doesn't. The seller. Your real estate agent. The builder. Anyone else who gains from the sale.
The reason is simple. Money from someone with a stake in the deal isn't really a gift.
What has to be in an FHA gift letter?
The gift letter is a short signed document. It carries four things.
The donor's name, address, and phone number
The donor's relationship to you
The dollar amount of the gift
A statement that no repayment is expected
That last line is really important.
Money that has to be paid back is a loan, and a loan changes your numbers.
You don't have to write it from scratch. I'll walk you through the form.
How do you document the transfer?
Underwriting needs to see both ends of the trip.
The money leaving the donor's account. The money arriving in yours, or at the closing office.
A wire, a check, or an electronic transfer all work, because each one leaves a record.
What doesn't work is cash.
I love Grandma. Underwriting does not love Grandma's envelope of cash.
If nobody can prove where the money came from, it can't count.
When should the money move?
Not yet. Call me first.
The timing and the paperwork go together, and it's far easier to set it up right than to explain it afterward.
For the rest of the FHA rules, including what the seller can pay and the loan limits for your county, read the free FHA Loan Guide for NH, VT, and ME. The FHA purchase loan page covers the program itself.
More in this FHA series
Frequently Asked Questions
Can gift money cover my whole FHA down payment?
Yes. FHA allows the full minimum down payment, 3.5% with a credit score of 580 or higher, to come from a qualified gift.
Does FHA gift money have to be paid back?
No. The gift letter states that no repayment is expected. If the money has to be repaid, it's a loan.
Can a friend give me the down payment on an FHA loan?
Yes, when it's a close friend and the relationship can be documented. The seller and your agent cannot.
The Bottom Line
A gift can be the thing that gets you into a home.
A qualified donor, a signed letter, and a paper trail. Do those three and it counts.
Not every file fits every rule. Let's see what's possible for yours.
Source: HUD Handbook 4000.1, gift funds.
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Derek Tsakiris | NMLS #1007898 | NEXA Mortgage, LLC NMLS #1660690 | Licensed in NH, VT & ME | Equal Housing
