Can I get a “gift” from my parents for a down payment?

Yes, you can! This is the classic case where the parents help out the kids buy their first home. It is allowed under Fannie Mae, Freddie Mac, and FHA mortgage guidelines.

The rules vary by program, but generally, the rules are it has to be a true gift and no expectation of repayment. It can’t be a loan to be paid back.
There will be a letter stating that it is a gift from the parents (or any other family member) to the borrowers and it is signed by all parties.

There is also a set of documentation that needs to accompany the gift to prove that it was the parents to give, it was deposited into the borrower’s account, and what the balance is after the gift was deposited. FHA also requires that the parents show what account it came from.

There is also a provision in the FHA mortgage guidelines that allow a family member’s “gift of equity” to purchase a home that the parents own but want to sell to the kids.

For Fannie Mae and Freddie Mac, the rules are slightly different. You can get a gift for part of the down payment but you would need a minimum of 5% of your own funds into the deal. Here is how this could work. You have 5% saved for a down payment and want to go with a conventional loan. You can get a gift for 15% from a family member and that would give you a total down payment of 20%. Having 20% down allows you to get a conventional loan without having to purchase private mortgage insurance. This is the exact deal that my wife and I got when we purchased our first home. Thanks Mom and Dad!

Anyway, if you think you will need a gift for a down payment, its best to come see your local mortgage professional ahead of time. There is a little extra work and time required to put this together. You also want to make sure your family members are aware and able to do the gift when you need it.

If you need further assistance with a gift for down payment, contact me at 208-955-1234 ext. 30.

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