What Is FHA Gift Money?

This post will specifically cover the topic of FHA gift money for my clients looking to purchase a home in the Claremont, Upland, Pomona, or Los Angeles, California areas.

Gift money for an FHA loan can be used to cover the down payment and closing costs.

Acceptable places to receive FHA Gift money from:

Family Member
“Documented” Close Friend
Employer
Church
Non-Profit

Non-acceptable places to receive FHA Gift money from:

FHA Lender
Seller
Agents / Loan Officers
Any other party involved in the purchase transaction
Business partner

Allowable FHA closing costs range from 3 – 4.5% of the purchase price, depending on the size of the loan. Since FHA allows the seller to pay closing costs of up to 6%, it is highly likely that a borrower can have enough money to cover costs and buy a lower interest rate with the properly negotiated deal.

Per 2009 California FHA guidelines, the minimum down payment requirement on an FHA loan is 3.5% of the purchase price.

Frequently asked questions about FHA Gift Money:

Q: What is the maximum amount of gift money that a borrower can receive?

A: There is no maximum other than the 6% of the purchase price limit.

Q: Does the borrower have to pay the gift money back?

A: No, then it is not a gift, it is a loan. Donors must complete paperwork stating no expectation of repayment.

Q: Just to clarify, can a borrower receive enough gift money to cover all closing costs and down payment, essentially allowing the borrower to move into a new property with no money down?

A: Yes

Please feel free to contact me with more questions about FHA loans, gift money, or an Upland, California mortgage.

Brian Wiesner