FHA Gift Funds: Guidelines for 2022
Supporting documents | Eligible sources | Eligible donors | Alternatives for down payment assistance | Summary | FAQs
For FHA loans, home buyers can receive 100% of their down payment or closing costs as a financial gift — essentially, a donation. As long as the gift isn’t a loan and it's not from someone with a financial interest in the home, you can use gift funds toward your home purchase.
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FHA guidelines for gift funds
FHA gift funds are assets given to a home buyer by a donor to help them cover:
- A down payment (required to be at least 3.5% of the purchase price)
- Closing costs (2–5% of the loan amount)
- Cash reserves or emergency savings
- FHA funding fees
Do FHA gift funds need to be seasoned?
No, gift funds don’t need to be "seasoned," meaning they don’t need to sit in your account for a certain amount of time.
What supporting documents are required for FHA gift funds?
To verify that the gift fund is indeed a gift, an FHA lender will require two documents from you: a gift letter and a financial statement.
🔍 Why does the FHA care? The FHA wants to be absolutely sure your gift fund is a genuine gift — no expectations, repayment schedule, or interest. A financial obligation to pay back the money could make your debt-to-income ratio too high for FHA loan requirements or leave you too strapped for cash to reliably pay your mortgage. |
🎁 A gift letter
A gift letter is a formal statement from your donor verifying that they’re giving you money with no strings attached.
Gift letters should generally include the following information:
- Recipient’s (your) name
- Donor's name and contact details
- Address of the property being purchased
- Donor’s relationship to you
- Exact amount donor is giving you
- Source of the gift (see eligible sources)
- Clear declaration that the gift isn’t a loan and repayment isn’t necessary
- Dated signatures from both the recipient and donor
» SEE: Free FHA gift letter template
💸 Statements showing the flow of money
The FHA wants to see a paper trail to prove the gift money left your donor’s bank and entered yours. The paperwork you submit depends on how your donor transferred the money: electronically or with a check.
If you received the funds by... | ...then YOU need to submit... | ...and YOUR DONOR needs to submit... |
|---|---|---|
Electronic transfer | A deposit slip matching the exact sum on your gift letter | A withdrawal statement matching the exact sum on the gift letter |
Cashier's check or certified check | A copy of the gift check clearing your bank | A copy of the canceled check |
Where can gift funds come from?
In general, the FHA doesn’t care where the donor’s money comes from, as long as you’re not obligated to pay it back and it doesn’t come from someone with a financial interest in the property.
Possible sources:
- Business account, so long as it's not from someone who will benefit from the purchase
- Home equity. For example, your parents may sell you their $300,000 home to you for $225,000. This sale instantly gives you 25% in equity, which equals a $75,000 down payment — satisfying the FHA requirement of 3.5%.
What if your donor gave you cash?
Cash on hand is not an eligible source of gift money. If your donor gave you cash, ask them to wire it to you electronically or give you a check (either cashier’s or certified).
Who can give gift funds on an FHA loan?
The FHA is also strict on who can give you gift money. Eligible donors include anyone who may have an interest in you — but NOT in the home purchase (i.e., they can't have a financial stake in the property).
Eligible donors | Ineligible donors |
|---|---|
Family members | Real estate agents |
Close friends or acquaintances | Investors |
Employers or labor unions | Sellers |
Charitable organization (e.g., church or nonprofit) | Lenders |
Government agencies that provide housing aid | Construction companies or builders |
Other ways to get help for your down payment
If you don’t get secure gift money, you can also get help with your down payment by:
- Finding a coborrower or cosigner, or
- Applying for first-time home buyers grants
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A coborrower pays the monthly mortgage with you — their name is on the title, and they may live in the house. A cosigner's income counts toward your debt-to-income ratio. A higher overall income will lower your DTI and could help you qualify for a lower down payment.
If you’re buying your first house, you could apply for one of the 2,500 grants, down payment or closing assistance, and loan programs for first-time home buyers in the U.S.
✍ Editor's note: Other loan programs allow gift funds with similar requirements, though most conventional loans permit funds from relatives ONLY. |
Summary
- A gift fund is an asset given by donors to home buyers to help cover the down payment, closing costs, FHA funding fees, or cash reserves.
- Gift funds can cover the entire down payment for FHA loans.
- Home buyers need to submit a gift letter and documentation proving they received the down payment gift from a donor.
- Anyone can give a gift fund so long as they don’t have a financial interest in the property sale.
FAQs about FHA gift funds
Yes, the FHA allows gift funds for down payments and closing costs from donors with an interest in the borrower — such as family members, close friends, employers, charitable organizations, and government agencies.
Yes, gift funds can be used for many home buying expenses. Higher cash reserves or emergency savings might help you qualify for an FHA if you have a high debt-to-income ratio (DTI).
In general, the FHA doesn’t care where the donor’s money comes from. As long as you’re not obligated to pay them back and it doesn’t come from someone with a financial interest in the property, your FHA lender will likely accept gift funds from a business account.
Yes, the FHA requires a gift letter and a financial statement to show that money went from the donor to you.
No, the gift fund cannot be cash. There must be a paper trail, either as an electronic transfer or a check.