Conventional loans. Typically, these loans allow the entire down payment to be gifted, provided the donor is a relative, spouse, domestic partner, or godparent. Lenders usually require a gift letter, which should clearly state that the funds are a gift and not a loan. This letter must include the donor’s information, the relationship to the borrower, and the amount of the gift. It’s important to note that while conventional loans are flexible with gift funds, the borrower must still meet credit and income requirements.
FHA loans. These loans allow the entire down payment to be gifted, which can be a huge relief for those who may not have substantial savings. The gift can come from a family member, close friend, an employer, and even a labor union, charitable organization or a government agency. Like conventional loans, FHA loans require a gift letter to verify that the funds are not expected to be repaid. This flexibility makes FHA loans an attractive option for many buyers who need financial assistance for their down payment.
VA loans. VA loans are available to veterans and active-duty service members, and offer unique benefits, including the possibility of no down payment. However, if a down payment is made, it can be entirely gifted. The donor must be a relative or someone with a close personal relationship with the borrower. VA loans also require a gift letter to ensure the funds are a genuine gift. This option provides veterans with additional financial flexibility, making homeownership more accessible for those who have served in the military.
USDA loans. These loans are designed for rural and suburban homebuyers who meet specific income requirements. They often require no down payment, but if a down payment is made, it can be fully gifted. The gift cannot come from someone with an interest in the sale, like the realtor or the builder. As with other loan types, a gift letter is necessary to confirm that the funds are not a loan. USDA loans offer an excellent opportunity for eligible buyers to secure a home with minimal upfront costs.