Can Family Members Give Gift Funds or a Gift of Equity to Cover My Down Payment?

Yes, family members can give both gift funds and a gift of equity toward a down payment, and both are widely accepted on FHA, conventional, VA, and USDA loans. Gift funds are typically limited to relatives, though a friend can sometimes qualify under narrow, specific rules. A gift of equity works differently. It is the discount a family member selling you a home gives off the market value, and that discount can stand in for a down payment.

Last updated July 22, 2026

Who can actually give gift funds?

A gift from a relative, such as a parent, spouse, domestic partner, or similar family relationship as defined by the loan program, is broadly accepted for the down payment. A friend can also be an eligible donor, but not automatically. FHA requires a friend to have a "clearly defined and documented interest" in the borrower, and conventional loans following Fannie Mae guidelines only recognize a formally designated "unrelated friend" donor category, a rule added in 2022. A casual friend outside those definitions typically will not qualify as a gift donor.

How does a gift of equity work?

A gift of equity happens when a family member sells you a home for less than its appraised market value. The difference between the market value and the discounted sale price is treated as your down payment. This is a recognized practice on conventional loans (Fannie Mae and Freddie Mac) and FHA loans, and it can reduce or eliminate the need for separate cash at closing, depending on how much equity is gifted.

Can gift funds be combined with other help, and do they count as reserves?

Gift funds can generally be layered with first-time-homebuyer down-payment-assistance (DPA) programs. Whether that assistance is ever forgiven, and when, depends entirely on the specific program. Some DPA loans forgive after a set number of years living in the home, commonly somewhere between 5 and 15 years depending on the program, not a fixed short period. Other programs, such as California's MyHome, are deferred-payment loans that come due when you sell, refinance, or pay off the first mortgage, with no forgiveness at all. Whether gift funds can also count toward required cash reserves depends on loan type: Fannie Mae's guidelines allow gift funds for the down payment, closing costs, or reserves, while FHA allows gift funds for the down payment and closing costs only, not reserves.

Does my credit score determine whether gift funds will work?

There is no single universal minimum score anymore. Fannie Mae removed its hard 620 floor from its automated underwriting system in late 2025, and now weighs the full credit, debt, and reserve picture together. FHA allows scores as low as 580 with 3.5% down, or 500 to 579 with 10% down. That said, many private mortgage insurance providers still require at least 620 on loans with less than 20% down, and many lenders keep 620 as an internal standard, so it remains a practical benchmark for many buyers even though it is not a hard federal rule.

It depends on your situation

Gift is from a parent or spouse: Generally straightforward across FHA, conventional, VA, and USDA, subject to standard documentation of the gift.
Gift is from a friend: Only works if the friend meets the program's specific donor definition; check with your lender before counting on it.
You're buying from a relative below market value: A gift of equity may be able to substitute for some or all of your down payment.
You're also using a down-payment-assistance program: Confirm whether that specific program's assistance is forgivable, and over what time period, or whether it must be repaid on sale or refinance.
You're on a conventional loan: Gift funds may be able to count toward reserves as well as the down payment.
You're on an FHA loan: Gift funds can cover the down payment and closing costs, but won't satisfy a separate reserve requirement.

Many lenders commonly like to see some savings remain in the borrower's accounts after closing, even when the down payment itself comes from a gift.

Key facts
Gift from a close relative	Broadly accepted for down payment on FHA, conventional, VA, USDA
Gift from a friend	Only allowed under specific documented rules (FHA: documented interest; conventional: formal "unrelated friend" category)
FHA seller/interested-party contributions	Capped at 6% of sales price, but only for closing costs and financing concessions, not the down payment itself
Credit score	No universal 620 cutoff since late 2025; FHA allows 580 (3.5% down) or 500-579 (10% down); many lenders/PMI still use 620 as a working benchmark
Gift of equity	Equals the gap between market value and the discounted sale price; recognized as a down payment equivalent
Gift funds as reserves	Allowed on conventional loans; not allowed on FHA loans

Sources

https://answers.hud.gov/FHA/s/article/Does-HUD-allow-gifts-of-equity
https://www.lower.com/mortgages/fha-loan/fha-gift-funds-down-payment-rules
https://selling-guide.fanniemae.com/sel/b3-4.3-04/personal-gifts
https://www.homebridgewholesale.com/bulletin/new-gift-funds-donor-eligibility-on-fannie-mae-transactions
https://answers.hud.gov/FHA/s/article/What-costs-can-a-seller-or-other-interested-party-pay-on-behalf-of-the-Borrower
https://www.rocketmortgage.com/learn/fannie-mae-credit-score-update
https://selling-guide.fanniemae.com/sel/b3-4.3-05/gifts-equity
https://guide.freddiemac.com/app/guide/section/5501.4
https://www.masshousing.com/en/home-ownership/homebuyers/down-payment-assistance
https://www.calhfa.ca.gov/homebuyer/programs/myhome.htm
https://themortgagereports.com/33553/complete-guide-to-down-payment-assistance-in-the-usa

Educational information only, not individualized financial or legal advice. Program details and rates change; verify current terms with a licensed loan officer before making a decision.