Can Family Members Give Gift Funds or a Gift of Equity to Cover My Down Payment?
Yes. Family members can give you cash for the down payment, and a relative selling you a home can give you a gift of equity by selling below its value. Both are accepted on FHA, conventional, VA and USDA loans with the right paperwork. Gifts from friends are more limited, and each program defines who can give.
Last updated September 29, 2026Who can give gift funds?
Relatives, like a parent, spouse or domestic partner, are accepted across the major programs, within each program's definition of family. Friends are narrower. FHA allows a close friend with a clearly defined and documented interest in you. Conventional loans have their own donor rules, so ask your lender before counting on a gift from someone who isn't family. Either way, expect a signed gift letter saying the money doesn't need to be repaid, and proof of the transfer.
How does a gift of equity work?
A relative sells you the home for less than its appraised value, and the difference counts toward your down payment. Fannie Mae, Freddie Mac and FHA all recognize it, and it can cut or eliminate the cash you bring to closing, depending on how much equity is gifted.
Can gift funds be combined with other help, or count as reserves?
Gifts can generally be combined with down payment assistance programs. Whether that assistance is forgiven depends on the program: some forgive it after you live in the home for a set time, often 5 to 15 years, and others are deferred loans that come due when you sell, refinance or pay off the first mortgage.
Whether a gift can count toward required reserves depends on the loan. Fannie Mae allows gift funds for the down payment, closing costs or reserves. FHA allows them for the down payment and closing costs, but not reserves.
It depends on your situation:
- The gift is from a parent or spouse: generally straightforward on any major program, with standard documentation.
- The gift is from a friend: it works only if your friend fits the program's donor rules.
- You're buying from a relative below market value: a gift of equity may cover some or all of your down payment.
- You're also using down payment assistance: confirm whether it's forgivable, and when.
- You need reserves: a gift can count on a Fannie Mae loan, but not on an FHA loan.
| Gift from a relative | Accepted on FHA, conventional, VA and USDA loans |
|---|---|
| Gift from a friend | Only under program rules; FHA requires a documented interest in you |
| Gift of equity | The gap between value and the discounted price counts as your down payment |
| Gift funds as reserves | Allowed on Fannie Mae loans; not on FHA loans |
| FHA seller and interested-party help | Up to 6% of the price, for closing costs, not the down payment |
Related questions
- do I Need a Home Appraisal for This Loan, or Can It Be Waived
- do I Have to Pay for the Appraisal Out of Pocket, and Is It Refunded If My Loan Doesn't Close
- can I Reuse or Transfer an Appraisal I Already Paid For to a New Lender
- what Happens If Your Home Appraises Lower Than Expected
- how much home equity you can access
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
Sourced from licensed loan officers and brokers in the FreeRateUpdate network.
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.