Are you buying a new home? Do you need $$ help for the down payment or closing costs? Home buyers can get help from family members for the down payment and closing costs. Since the passage of HR 3221, parents will actually be able to contribute towards the down payment and closing costs as a loan. Prior to this, the funds had to be a gift.
Both FHA and conventional mortgage loans allow for gift funds, but they have different requirements.
Here are important details about FHA Gift Requirements:
HUD wants to make absolutely sure that gift funds are NOT from the seller, real estate agents, builder or anyone who has an interest in the transaction. Although the rules may seem invasive, the donor must prove that the funds they are giving are their own and they must sign a Gift Letter that includes the gift amount. The letter must state that no repayment is required. The purpose of this is to show that the homebuyer has NOT incurred a loan from the family member that has not been calculated in their debts owed.
If the gift funds are already in the home buyer’s checking (or other) account, then a copy of the canceled check (front and back) from the donor will be required. And a copy of the home buyer’s deposit slip or bank statement that shows the deposit. If the donor is not able to provide a copy of the canceled check, they will need to provide other evidence that the funds came from their assets - (such as the bank statement showing the funds being withdrawn from their account).
If the funds are to be provided at closing to the title company, the donor must provide a copy of the withdrawal document or canceled check, copy of the check and a copy of their bank statement showing the withdrawal of funds.
“Mattress” money or cash in the drawer are not considered acceptable forms of gift funds.
Documentation and creating a paper trail documenting the transfer of the gift are very important. For FHA, gift funds can go towards both the down payment and closing costs. Seller contributions are limited to actual closing costs and prepaids (and cannot go towards down payment). However, the buyer must meet the minimum required personal investment of 3.5%.
Gift funds are not limited to family members; employers and charitable organizations (as long as they are not funded by the seller after October 1, 2008) are also permitted to contribute gift funds with FHA financing. Family members may include grandparents, brothers, sisters, aunts, uncles — even close family friends – as long as the relationship can be documented.
If you’re in the market to buy a home and have questions about the gift program, let me know. I have worked with FHA since 2001.
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{ 2 comments… read them below or add one }
I got a FHA pre approval can my boyfriend gift me 8000 dollars. Which he got a loan for
@Monica – It’s possible Monica. But there are too many details needed to know precisely. For now, I suggest you deposit the gift from your boyfriend into your account ASAP. And keep all your records.