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Gift funds for down payment

February 8th, 2020 7:05 PM by Sam Kader

Potential home buyers with insufficient funds for down payment can receive gift funds. However, it must meet certain requirements: 

Who can gift? Conventional loans require that the donor must be a relative defined as related by blood, marriage, adoption or legal guardianship. Domestic partners and fiances are also eligible to give funds for a down payment.  FHA loans offer a broader eligibility range that include family members, friends ("with a clearly defined and documented interest in the borrower), labor unions and employers and charitable organizations as well as from down-payment assistance programs for first-time and low-income buyers. Sellers, realtors, home-builders and anyone with vested interest in selling the house are not eligible donors. 

How much of a down payment can be gifted? Conventional and FHA loans allow an entire down payment (100%) to be gifted by an eligible donor. FHA loan requires a minimum credit scores of 580 for a minimum 3.5% down to be gifted. FICO scores between 500 to 570 requires 10% down. 

Conventional financing requirements are different than FHA and is further differentiated between Fannie Mae and Freddie Mac - see Exhibit below: 


Gift process.  A specific steps must be followed: 

  1. A Gift letter which I will provide must be completed by the donor along with a copy of gift check from donor and a copy of donor's bank print out showing bank balances BEFORE and AFTER gift funds cleared the donor's bank account. 
  2. A gift letter must be signed by both the donor and the recipient. 
Is the gift taxed? The IRS currently gives people a lifetime gift exemption of up to $11.4 million over the course of your lifetime. 






Posted in:Gift funds and tagged: Giftfunds
Posted by Sam Kader on February 8th, 2020 7:05 PM

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Pacific Coast Financial, LLC

MLO#130505 Lic# MB 78982

2150 N. 107th Street Suite 170
Seattle, WA 98133