Approved Sources Of Funds For Down Payments For FHA Loans

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When you are buying your first house, many times I see young couples that get a “gift” from the parents to buy the house. Is getting a “gift” from your parents an acceptable source of a down payment for your FHA loan?

Yes.

If you have the right documentation.

And along those same lines of getting a gift from the parents, what other types of things are acceptable when it comes to down payments and closing costs when getting an FHA loan?

Acceptable Sources of Funds For FHA Loans

  • Checking/Savings Accounts/CDs
  • Lease to Own/Rent Credit with Option to Purchase
  • Interested Party Contributions (subject to limitations)
  • Loan Repayment Proceeds (with appropriate and acceptable paper trail)
  • Corporate Relocation Buyout
  • Relocation Benefits
  • Use of Business Funds (as per policy and if allowed by underwriter)
  • Disaster Relief Grant or Loan
  • Non-Traditional Savings Plan/IDA Accounts
  • Employer Assistance
  • Gifts
  • Gifts-Pooled Funds
  • Gifts of Equity
  • Gifts/Grants from Non-Profit
  • Gifts – Wedding
  • Retirement Accounts
  • Proceeds from Sale of Home
  • Sale of Assets
  • Government Bonds
  • Stocks/Securities
  • Inheritance
  • Trade Equity
  • Land Equity
  • Trust Account
  • Life Insurance Net Cash Value
  • Bridge/Swing Loans
  • Income Tax Refunds
  • Saving Funds to Close
  • Gambling or Lottery Winnings (this is my favorite one)
  • Lawsuits or Insurance Settlements
  • Borrowed Funds Secured by an Asset
  • Financing Concessions
  • Cash-on-Hand

Documentation Is Key

No matter where the funds for your down payment and closing costs are going to come from, the key is to be able to document where they are coming from. In some cases, a simple bank statement and deposit slip may work. In others, you may need to provide signed letters of explanation. Your loan officer will be able to help you know what types of documentation you are going to need to provide the underwriter.

Are there other places where you could possibly get your down payment and closing costs from? Sure. But this list is a great starting point of some of the most common sources allowed – and if the funds are coming from anywhere else, be sure to check with your loan officer.

Justin McHood

Justin McHood is a Mortgage Commentator living in the Phoenix, Arizona area and is happy to answer any mortgage-related questions that you may have.
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Justin McHood is a Mortgage Commentator living in the Phoenix, Arizona area and is happy to answer any mortgage-related questions that you may have.

1 Comment

  1. Anne Inzunza on

    What if the gift is from a fiancee who will also be living in the property? Will the fiancee’s finances be looked at also? There’s no wedding date at this time.

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