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FHA down payment gift rules

In 2008 the Federal Housing Administration, in a move to try and get permission from congress to insure 100% home loans, were able to get most private third party down payment assistance programs eliminated from the process. Government and civic organizations are still able to operate but some of the largest DPA companies are out of the business of helping home owners with their required contribution to the loan process.

Since that date the only way to get down payment assistance is from generally higher priced government assistance programs or from a gift from a family member or employer. According to the HUD Handbook, chapter 2-10(C):

“Gift Funds.An outright gift of the cash investment is acceptable if the donor is the borrower’s relative, the borrower’s employer or labor union, a charitable organization, a governmental agency or public entity that has a program to provide homeownership assistance to low- and moderate-income families or first-time homebuyers, or a close friend with a clearly defined and documented interest in the borrower.”

There is much more to it than simply having the funds available. Not only does the gift money have to exist. The paper trail, evidence of the donor’s ability to give and proof of the relationship also has to be verified.