FHA Gift Funds: 2026 Guidelines

FHA gift funds paired with an FHA loan can make buying a home a million times easier. With an FHA loan, you can receive up to 100% of your down payment or closing costs as gift funds— if someone is willing to give you that much, of course! But what’s the catch? Is it really that easy to just accept the FHA gift funds and buy the house? Sorry, but no.

There are rules you’ll need to follow in terms of how gift funds can be used and who can give them to you. Changes made in 2024 to FHA gift fund rules by the U.S. Department of Housing and Urban Development (HUD) could have an impact on your eligibility in 2026. Here’s what you need to know to keep yourself out of trouble if you're planning on accepting gift funds to go toward your FHA loan.

FHA 2026 guidelines for gift funds

According to the U.S Department of Housing and Urban Development handbook, FHA gift funds are assets given by a donor to help a buyer who is using an FHA loan cover any or all of the following:

• A down payment (required to be at least 3.5% of the purchase price with an FHA loan)
• Closing costs (typically 2–5% of the loan amount)
• Paying off debts to help you qualify for your loan
• FHA funding fees

What documentation is required for FHA gift funds?

An FHA lender will require a gift letter and proof of transfer to verify that the gift fund is indeed a gift. They want to make sure you’re not getting yourself into more debt than what you’re already taking on from the lender. If the funds were a loan instead of a gift, it would increase your debt-to-income (DTI) ratio, potentially beyond FHA loan qualification requirements.

What is a gift letter for FHA gift funds?

A gift letter is a formal statement from your donor verifying that they’re giving you money with no strings attached and no expectation of repayment.

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
• Clear declaration that the gift isn’t a loan and repayment isn’t necessary
• Dated signatures from both the recipient and donor

What are statements showing proof of transfer for FHA gift funds?

The FHA wants to see a paper trail to prove the gift money left your donor’s bank and entered yours. Thanks to updates implemented in 2024, your documentation options for showing proof of transfer in 2026 have expanded and depend on whether the gift was transferred before or at closing.

For gifts transferred before closing, proof of transfer can include one of the following:

• Donor’s bank statement showing the withdrawn amount alongside proof of deposit in your account
• Copy of the donor’s canceled check along with proof of deposit
• Copy of donor’s withdrawal receipt plus evidence of deposit in your account
• Proof of an electronic transfer from the donor’s account to yours

For gifts verified at closing, proof of transfer includes the following:

• Proof of electronic transfer from the donor to the settlement agent
• Copy of the donor’s check to the settlement agent
• Certified/cashier’s check made to the settlement agent

Note that gift funds received at closing must be mentioned on the Closing Disclosure form, which is a form with all the details of your loan that will be given to you before closing. You’ll need to communicate with your lender to make sure any gift funds you’ll receive at closing are included there.

Can you receive cash as FHA gift funds?

Cash on hand is not an eligible source of FHA 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).

Where can FHA 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.

Here are some possible sources for FHA gift funds:

• Personal savings or checking accounts
• Sale of investments, such as stocks or bonds
• Business account, so long as it's not from someone who will benefit from the purchase
• Home equity credit, so long as it’s from a family member

Who can give FHA gift funds?

The FHA is 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 include the following:

• Family members (related by blood, marriage, or adoption)
• Close friends with a clearly defined and documented relationship
• Employers or labor unions
• Charitable organizations (e.g., churches or nonprofits)
• Government agencies that provide housing aid

Ineligible donors are those who have or could have a financial interest in the sale, including:

• Real estate agents or brokers
• Property sellers
• Lenders
• Construction companies or builders
• Anyone else who would financially benefit from the sale even if they are a friend or relative

Who is considered a family member for FHA gift funds?

A family member is defined by HUD as a close relative by blood, marriage, or adoption, including foster children. Specifically, your family members may include the following:

• Children (including stepchildren)
• Parents or grandparents (including stepparents/grandparents and foster parents/grandparents)
• Spouse or domestic partner
• Legally adopted children
• Foster children
• Siblings (including stepsiblings)
• Uncles or aunts
• Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, sister-in-law.

Alternative ways to get help for your down payment

If you can’t secure gift money for your FHA loan, you can also get help with your down payment through the following:

• Finding a co-borrower or cosigner: A co-borrower 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.
• Applying for first-time home buyer grants: 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.
• Considering other low-downpayment options: FHA loans aren’t the only low downpayment loan option. Other federally backed mortgages, such as VA loans and USDA loans, have zero or low downpayment requirements.

FAQ about FHA gift funds

Disclaimer: The information provided in this article is for informational purposes only. It is not intended as legal, financial, investment, or tax advice, and should not be relied upon as such. Consult a licensed financial advisor or tax professional regarding your personal financial situation before making any decisions.