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What are the rules for using 'gift funds' for first time buyer's down payment?

Our bank would only accept 'gift funds' for 10% of the down payment; the rest as well as the closing costs had to come from our own resources. My husband's father was going to cover 20% for our down, but we could not qualify unless we used our own funds. We use a credit union, so is this the rule in mortgage lending?
  • July 09 2010 - Norfolk
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Answers (6)

I am not sure what "take into consideration who is paying the closing costs" means. What does that mean, Annette?
  • July 10 2010
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Your credit union used their rules and contract they have with FNMA or FHLMC. FHA allows all the downpayment and closing costs to be a gift. Some lenders have contracts with FNMA &/or FHLMC that allows downpayment gifts if it at least 20% of the sales price. They will take into consideration on who is paying the closing costs.
  • July 09 2010
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Dalepat, congrats on the largesse of your Dad, and yes, there are programs that will allow such a generous gift. Home Savings of America is one, I am sure there are plenty more on Zillow. Jim Ryan, HSOA, Chantilly, VA. Due to new Zillow fees etc, we are no longer allowed to include our contact information.
  • July 09 2010
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On a conventional loan you must have 5% of your own funds, the rest can be gifted.  With a FHA loan, the entire down payment can be gifted.  Sounds like your credit union has an additional overlay.  Do you not have any savings that you can show?
  • July 09 2010
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i would suggest you talk to another bank or broker.  Using gift funds should not be a problem for you.
  • July 09 2010
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Your credit union has credit over lays to FannieMae rules. As long as 20% down is being made by a gift from a family member you are good to go. If you need the name of a lender that does not have that credit overlay that your credit union has and will have no problem with the gift give me a call at [contact info removed by moderator]
  • July 09 2010
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