FHA Gift Programs
A Gift for the down payment and closing cost may come from sources such as: family member, close
friend, borrower’s employer or labor union, a charitable institution, or a governmental agency or public entity that has a
FHA accepted down payment assistance program.
All funds for down payment and closing expenses may come from an acceptable gift or grant program. These funds must be
completely documented to show that no repayment is expected and the donor will
not place a lien on the subject property. Gifts may not be used to meet the
borrower’s 3 months PITI
reserves requirement for 3 and 4 unit purchases.
Gifts must not be used to increase a borrower’s assets to show
reserves after closing that would alter the DU or LP findings from
a Refer or Ineligible status to an Approve Eligible or Accept status. The underwriter must review the findings to
determine whether or not any gift amount is considered in the reserves reviewed by the
system. The gift amount must be deducted from the reserves and the loan must be run through the system again to provide the
real picture of the
borrower’s assets and obtain
a clear for close approval.
An original gift letter is required. The letter must state there is no repayment required and
state the donor is not tied to the loan transaction.
The lender must completely document the transfer of gift funds from the donor’s account to the
borrower’s account by obtaining a copy of the
canceled check or other satisfactory withdrawal document that shows the gift
leaving the donor’s account and then being deposited into the
borrower’s account. If the gift is being received at the closing, a certified check from the donor and a copy of the
withdrawal receipt from the donor’s bank account is required. The closing agent
must make copies of these documents and forward to the lender with the closing
package.
If the donor borrowed funds for the gift, the donor must
provide acceptable documentation that the funds were not borrowed from a party
in the transaction or the mortgage lender. Cash on hand
from the donor is not acceptable.
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