Can my Fiance Gift me money for FHA loan.?

Asked by RentPoor, Pittsburgh, PA Sun May 12, 2013

My fiance and I are looking to buy our first home. We need to break "the rent cycle" so that we can build a better life for our small family. We found a home and were shocked by the amount of cash that would be needed at closing (according to our cash to close estimate.) We only have about half and it took us 3 years to save that. My Fiance obviously will be living with me in the home, however I am the only applicant on the FHA loan because of his credit issues.

Since he is in no way responsible for the repayment of the home loan, is it possible for him to take out a small personal loan (about $3000) and gift it to me to put toward my down payment and/or closing costs?

We are desperate to get into a home of our own. The house we wanted to put on offer on is not only well within my pre-approval, but also, the mortgage payment would be LESS THAN HALF of our current rent. That could mean the difference to us between living paycheck to paycheck, and saving for a future!

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Christopher…, Agent, Camp Hill, PA
Wed Jun 26, 2013
The gift should be fine since he will not be on the mortgage but I would consult with your lender. As for him taking a loan out to gift you this money, that will not work. Sounds like you are going FHA and if money is gifted to you the underwriter will want to see that persons bank statement showing that they have this money available.I just had a buyer whose mother gifted her the money for a down payment and she did a cash advance to get the funds and the underwriter denied the gift because it was not from her own funds, you could have different results with your lender. When you find a home you love and you have your minimum 3.5% down payment ask the seller to pay 6% in seller help it is a very standard practice and any Realtor will be able to help you in this matter. I hope this helps and best of luck to you.
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Dan Haeck, Agent, Pittsburgh, PA
Tue Jun 25, 2013
Being rent poor is nothing new these days. Your situation sounds like a close call as to if the gift will be valid from your fiancé. I would definitely consult with a lender about that. It is a good plan if it is allowed. More importantly, be sure to ask your lender to explain "seller's assist" where you offer more for the home, and the seller credits it back to you at closing to use towards your closing costs. There are restrictions on the amount you can get depending on the amount your loan details and the amount of closing costs. It can be as much as 6% so be sure to ask.
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John Cushma, Mortgage Broker Or Lender, Wexford, PA
Thu Jun 20, 2013
Closing Cost Shock is a true reality for many potential home buyers around the country. One area that I am very good in is structuring a deal so you bring little cash to closing. I do this by presenting the following:
- How to structure an offer so you get the full 6% from the seller to pay some closing costs
- Offering a "Lender Credit" to reduce those closing costs even more. What this means is, say I present you with a scenario with a rate of X. I can also show you a scenario with a higher rate, but also providing a generous "Lender Credit" to reduce those closing costs even more.

Keep in mind, it is FHA/HUD rules that you are invested in the home for the minimum 3.5% of your own documented funds. There is no way around that, so you would need to have atleast this much in your bank.

No portion of any down-payment can be made by a loan. The reason is, you can't borrower money so you can borrow more money.

Your fiancé can 100% gift you the money, and it would be as simple as us getting a little documentation to show that you are engaged. This would help us with the "relationship" rule that HUD has.

I think I could help out with your scenario, so please reach out to me if you would like to chat!

Also, if you were looking at a home outside of the City of Pittsburgh, there is always the option of a USDA loan, which is NO down payment, and I can usually structure those so that there is little to no money needed for closing. There are actually some eligible areas just outside of city limits.


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Jim Simms, Mortgage Broker Or Lender, Louisville, KY
Mon May 13, 2013
This is a question for your lender, it is allowed by FHA but may not be allowed by the lender you are working with. I recently saw one of my competitor’s guidelines posted online and they required a credit check for anyone that was listed on title, that is a tough one. But it is a good signal for you to consider also, if your fiancé has credit issues how will that impact you if one of the creditors gets aggressive after you buy the home?

What happens if you don’t get married? They get hit by a truck or crushed by a meteor? Do you intend to put them on title with you? All questions to ask your attorney before signing a 30 year obligation.

Anyway, here is the blub on this subject from FHA’s handbook:

4155.1 5.B.4.b
Who May
Provide a Gift
An outright gift of the cash investment is acceptable if the donor is
• the borrower’s relative
• the borrower’s employer or labor union
• a close friend with a clearly defined and documented interest in the

Jim Simms
NMLS # 6395
Financing Kentucky One Home at a Time
Web Reference:
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Brian Basile, , Pennsylvania
Mon May 13, 2013

Do you know her credit score. You may not have to over complicate things, FHA is a lot more lenient on credit than conventional. Also, if she can't go on the loan and your credit score is high enough, you can also go conventional and your mortgage insurance is much less!

Brian Basile
Mortgage Loan Originator 883953
Vision Mortgage Capital
620 West Germantown Pike,
Plymouth Meeting, PA 19624
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Ruth and Per…, Agent, Los Gatos, CA
Sun May 12, 2013
Hi RentPoor

Yes in a FHA loan, the entire or part of the down payment can be gifted by a family
Member. Check with your lender.

Good luck.
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Randall Ortiz, Agent, Sacramento, CA
Sun May 12, 2013
Speak with your lender before he takes out the loan. I would speak with a couple different lenders if the first one tells you no. It may be as easy as getting a letter of explanation about where the money came from.
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Denise Bruno, Agent, Canonsburg, PA
Sun May 12, 2013
Very good question! The best advice I can give you is to speak with your lender. I would hate to see you find the home, place the offer & hand money, pay for inspections which are costly, then have the bank denie you 2 days before closing because of the funds that are not from savings. Good luck!
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Jeffrey Benn…, Agent, Pittsburgh, PA
Sun May 12, 2013
FHA is the way to go if you're short on cash; you can put at little as 3% down, though you will need to pay monthly insurance and a significant upfront fee (basically pre-paying the interest). If you qualify for a conventional loan, you can ask for seller assist (up to 6%, if you put 10% down, so it's possible to get close to FHA terms and avoid some fees and the extra inspection, if your credit is good enough). Talk to a mortgage broker about what is possible here.

Generally a gift can't be borrowed; the lender will "source" the funds to see where they came from. The down payment definitely has to be real savings from past income. *Maybe* a gift from a loan is possible if the borrower is not the buyer and the agreement is not contingent on it; it's really up to the lender what they're willing to accept.

My main concern with you would be making sure you're really ready to buy. Home ownership comes with lots of new expenses; you're now fully responsible for *all* utilities, maintenance, repairs, etc. (Do you have a lawnmower?) You will probably need furniture, moving expenses, and so on.

Because of these expenses, you don't want to use *all* your savings on the house. You don't want to be completely broke after closing! Nor do you want to be right at your debt limit immediately. There will likely be some minor inspection issues you'd want to fix right away; if you neglect them, they can turn into bigger problems later.

Are you considering taxes, mortgage and homeowner's insurance in the mortgage payment? Hopefully it will still be less than your rent! You'll want to continue saving after the purchase, at least 1% a year, so that you have some reserves in case you need emergency repairs, maintenance, or other unexpected expenses. Careful budgeting and controlling expenses will be very important as you go through and adjust to this major life change.

Be sure you have adequate income and reserves to survive moderate adversity. This is how foreclosures happen: you exhaust all your savings and are at your debt limit after the purchase -- then the car breaks down, sombody gets laid off or sick, you miss a couple payments, and suddenly you're fighting to keep your new house.

Once you have some equity in the home, you can get a line of credit against the house as a form of insurance against sudden large expenses (better than putting it on a 20% credit card -- another way bankruptcies and foreclosures happen), but nothing beats good old-fashioned cash reserves.

Good luck!
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