Can I use gifted money on a house hack?

Question

Hi everyone, my name is Carsen. I'm planning on getting into my first multifamily house hack this year in Lincoln, NE, with gifted money. My grandfather recently passed away, and some money has been given to my parents. They are open to me using it as a down payment.

The plan is to use a 5% FHA loan, live in it for a year, and continue investing from there.

Is this possible with gifted money? Is there anything I need to be careful of when dealing with gifted money and FHA loans? What problems might I run into? and is there anything I should be paying attention to/how would you approach the situation?

It's difficult finding anything on these forums with someone in a similar situation. I appreciate the help.

Grant Shipman · Answer

Yes, simply have it documented according to your mortgage brokers requirements.

Eliott Elias · Answer

You can use it, the lender will ask where the money came from. More than the cash they want to see your DTI and credit

Stacy Fernandez · Answer

Gift funds shouldn't be an issue if it's coming from a family member and you disclose it with your lender. I agree with Scott seasoning the money in your bank account is wise, it just leaves less questions to be sorted through for the lenders (especially if the amount is more than 10k). Most lenders here in town will use the last two bank statements for your loan qualification.

I wouldn't limit yourself to only using an FHA loan. I work with lenders here in town that are really good at helping you weigh the different loan options, like Juan said NIFA is a good program to consider. They just came out with a new program if you have higher income limits than the original one.

I'd recommend getting with an agent that can help you find a lender and start working on your pre-approval. That way you know exactly what the bank will need and your next steps.

If you need an agent, I am one! I believe we have already had some contact through the BP agent request, so looks like we need to get in contact official!

Scott Trench · Answer

Many banks will check your bank account statements for the past few months to determine where cash in your life comes from. If you are considering a gift for a down payment, it might be wise to sit on that cash for several months prior to closing a loan and/or getting prequalified, and/or invite your parents to co-sign the mortgage with you. Regardless, you should disclose anything to your lender that you are legally required to.

However, I don't think that this would be anything out of the ordinary. I imagine that every day, hundreds or thousands of first-time homebuyers purchase their first property with at least some parental assistance.

Sanat Bhandari · Answer

@Carsen Gobber You should be good to use gift funds on an FHA loan as long as they're from a close family member. All they would have to do is write up and sign a gift letter stating that it is a gift and no repayment is expected or enforced

Gift funds are exactly how I got my second SFH primary residence in Omaha, NE. Feel free to reach out if you need any help with using gift funds for your SFH purchase, I'm very familiar with the Lincoln market having lived there for college

Drew Sygit · Answer

FHA allows 100% gift funds from a related party

Juan Erick Rico Avalos · Answer

Hey Carsen, I am currently a year into my first house hack, looking at purchasing my next one. I am also in Lincoln, Ne. You shouldn’t have any issue with that money being gifted. I was required to have reserves on my duplex since this was my first rental property, 6 months of reserves to be exact. My loan officer suggested to have my parents gift me money as long as they sign a letter saying there is no obligation to pay them back. So I used that as my reserve. She even mentioned once I closed I could just give them the money back. I didn’t have to pay taxes on that either since I can receive up to 15k tax free a year from my parents. I did end up giving it back 2 months later. Of course check with your loan officer first. I also suggest looking into NIFA. It is a Nebraska specific program designed to help first time home buyers buy their first home. It also allows for up to 4 unit properties. They will help with up to 10k towards your down payment at 1% interest rate. You can’t beat that. If your low income you might not have to pay 5k of that back. This will allow you to use more of your capital for future deals or rehab. Also consider going conventional on your first property. I got a 5% down conventional on my duplex. This will allow you to move out sooner and not have to re-finance if you wanna house hack again into another property. Your offers will also be more competitive compared to FHA offers. If you have any further questions don’t hesitate to PM me hope this helps.

Kristen L Garner · Answer

You can use gifted funds for owner occupied purchases.  You may need to fill out a "gift letter" or provide supporting documentation to prove the gift was from a family member, but using it shouldn't be a problem.

Thuy An · Answer

Since you are going to live in the house for at least one year, gift money from your parents is totally fine.  I am a realtor at Nebraska Realty and a property manager at Performance Property Management.  I live in Lincoln, NE.  If you need help with finding houses and have questions with leasing houses, don't hesitate to reach out.

Can I use gifted money on a house hack?

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