Requirements for FHA Gift funds for FHA loan down payment

One of the best things about FHA is they allow the down payment to be gifted from qualifying individuals. What this means is that if you do not have a lot of cash saved up for a down payment but your family is willing to help you buy a house they can gift you money that you can use towards the down payment of a FHA loan purchase.

What are the FHA down payment requirements? FHA requires 3.5% of the purchase price as a down payment

Who can gift money to the borrower? Good question. Not anyone can gift money for a borrower to use as a down payment. The gift donor must have a family relationship with the borrower.

What are the proper procedures and documentation required?

If the gift funds…

Are in the borrower’s account

Then the lender must….

Obtain a copy of the withdrawal documents showing the funds were from the donor’s account. and the borrower’s deposit slip and bank statement showing the deposit .

If the gift funds…

Are to be provided at closing, and are in the form of a certified check from the donor’s account.

Then the lender must….

Obtain the bank statement showing the withdrawal from the donor’s account, and a copy of the certified check.

If the gift funds…

Are to be provided at closing, and are in the form of a cashier’s check, money order, official check or other type of bank check.

Then the lender must….

Have the donor provide a withdrawal documents or cancelled check for the amount of the gift, showing that the funds came from the donor’s personal account.

If the gift funds…

Are to be provided at closing, and are in the form of an electronic wire transfer to the closing agent.

Then the lender must….

Have the donor provide documentation of the wire transfer.

Our advice; have funds wired to the title company directly from the donor and avoid all the hassle of gathering unnecessary papers.

P.S. Did you know that the donor can borrow money to give you as a down payment?

It is true. The Donor can borrow money from acceptable sources and give that money to you for your down payment. That source of the loan cannot be from the realtor, loan officer, seller, or any other party to the transaction, and of course everything must be well documented.

However, it is important to note that the fha loan borrower cannot be obligated in any way to repay the loan or repay the donor. A gift for a FHA loan down payment must be a gift.