4. Gifts as an Acceptable Source of Funds

Introduction

This topic contains general information on acceptable sources of borrower funds that can be used for mortgage closing, including

•	closing cost and minimum cash investment requirements, and

•	types of acceptable sources of borrower funds.

Change Date

May 10, 2009

4155.1 5.B.1.a Closing Cost and Minimum Cash Investment Requirements

Under most FHA programs, the borrower is required to make a minimum down payment into the transaction of at least 3.5 percent of the lesser of the appraised value of the property or the sales price.

Additionally, the borrower must have sufficient funds to cover borrower-paid closing costs and fees at the time of settlement. Such funds used to cover the required minimum down payment, as well as closing costs and fees, must come from acceptable sources and must be verified and properly documented.

References: For more information on

•	the required minimum down payment, see HUD 4155.1 2.A.2.c

•	settlement requirements, see HUD 4155.1 5.A, and

•	acceptable sources of borrower funds, see HUD 4155.1 5.B.1.b.

4155.1 5.B.1.b Acceptable Sources of Borrower Funds

The table below lists the acceptable sources of borrower funds and a reference for locating additional information on the various types of funds.

Acceptable Source of Funds		Reference
•	Earnest money deposit	See HUD 4155.1 5.B.2
•	Savings and checking accounts
•	Cash saved at home
•	Cash Accumulated with private savings club
•	Savings bonds	See HUD 4155.1 5.B.3
•	IRAs
•	401(k) and Keogh accounts
•	Stocks and Bonds
•	Thrift Savings Plans
Gift Funds		See HUD 4155.1 5.B.4
•	Sales proceeds	See HUD 4155.1 5.B.6
•	Sale of personal property
•	Commissions from sale
•	Trade Equity
•	Rent Credit
•	Sweat Equity
•	Collateralized loans	See HUD 4155.1 5.B.7
•	Disaster relief grants and loans	See HUD 4155.1 5.B.7
•	Employer's Guarantee Plans	See HUD 4155.1 5.B.8
•	Employer Assistance Plans	See HUD 4155.1 5.B.8