Struggling for money for a down payment? Is a gift possible?

One of the biggest issues for many when it comes to buying a home is the down payment.  The days of zero down mortgages are gone other than VA and USDA mortgages.  If you can qualify for one of those two mortgages, you can still buy with zero down!

For everyone else, you need at least 3.5% down for FHA and typically 5% for conventional loans.  So what if you can get a gift?  How does that help?  FHA has always allowed gift money, so that is an option.  With FHA, we do have to document that the donor has the ability to give the gift, so we need a bank statement showing that they had the money to give you.  Another option is a conventional loan.

At the end of 2013, Fannie Mae changed their policy on down payment.  In the past, we always had to document 5% of your own money on conventional loans (other than a couple special programs).  Now they will allow you to get a gift of 5% (or more) and use that for your down payment.  This is very helpful for those that can qualify for conventional loans and get at least 5% in a gift.  Conventional loans still require mortgage insurance, but it is much cheaper than FHA's mortgage insurance and it will go away once you have enough equity in the home.  

There are still some lenders that will not allow you to purchase with a 5% gift, so ask your loan officer about it and make sure.  If you are putting more than 5% down and have part of your own down payment, you may have to document that you have at least 5% of your own money.  But if the down payment is all gift money, that is ok!

Make sure your lender has a mortgage insurance company that will allow gift money for down payment- some want you to have 3-5% of your own money into the transaction, but not all of them require that!

If you aren't sure about your options, talk to your lender.  If you don't get the answers you think you should, check with another loan officer or email/call me and see if you can use gift money!  It may allow you to buy a home sooner than you expected!

Leslie Vanderwerf,  NMLS ID#335509, American Mortgage & Equity Consultants, NMLS#150953 - Email - Website

Written By

Currently a Senior Loan Officer at Cross Country Mortgage LLC, it's hard to believe I have been in the mortgage business for more than 25 years and have worked with Sharlene since 2000! I love sharing mortgage insights here each week and helping people finance their homes. Listening helps me find the right program for you!

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