FHA vs Conventional Loan Gift Fund Rules: What Homebuyers Need to Know

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What is the main difference between FHA and conventional gift fund rules?

The main difference is the list of acceptable donors. Under HUD Handbook 4000.1, an FHA gift can come from five kinds of sources. Under Fannie Mae's Selling Guide, a gift comes from a relative or from a non-relative who shares a familial relationship with you. Other differences are the signatures on the gift letter, the rules on how much of your own money you must contribute, and the limits on what a seller can pay toward your costs.

Confirm your loan program with a loan officer before you ask anyone to give. The donor list, the documents and the signatures all follow from the program.

FHA and Fannie Mae gift rules at a glance

What are the FHA gift fund rules?

An FHA gift is a contribution of cash or equity with no expectation of repayment, and it must come from one of the sources HUD lists. The handbook lists the borrower's family member; the borrower's employer or labor union; a close friend with a clearly defined and documented interest in the borrower; a charitable organization; and a governmental agency or public entity with a homeownership assistance program for low- or moderate-income families or first-time homebuyers. Some employers offer housing assistance. Employer contributions are not currently supported on Dreamfund.

HUD defines family member as a child, parent or grandparent (including step and foster relationships), a spouse or domestic partner, a legally adopted son or daughter, a foster child, a brother or sister (including step), an uncle or aunt, or an in-law of the borrower. The donor's own money must also be traceable: HUD says cash on hand is not an acceptable source of donor gift funds.

The seller, and anyone else who benefits from the sale, cannot fund your required investment. HUD's rule is that funds for the minimum required investment must not come from the seller, any other person or entity who financially benefits from the transaction directly or indirectly, or anyone who is or will be reimbursed by either.

Can 100% of an FHA down payment be a gift?

A gift can cover the FHA minimum required investment when the donor is an acceptable source and the gift meets HUD's source rules. The handbook sets the minimum required investment at at least 3.5% of the adjusted value of the property, and it says any gift of that amount "must also comply with the additional requirements" for the source of the minimum required investment.

The 3.5% figure goes with a credit score of 580 or above, which HUD says makes a borrower eligible for maximum financing (a maximum loan-to-value of 96.5% for a purchase). A borrower with a minimum decision credit score between 500 and 579 is limited to a maximum loan-to-value of 90%, which means a larger down payment. Your lender calculates the exact requirement from the adjusted value of the property.

What are the conventional gift fund rules?

Under Fannie Mae's Selling Guide, a gift can come from a relative or from a non-relative who shares a familial relationship with the borrower, and the donor cannot be the builder, developer, real estate agent or another interested party. Gifts are allowed on a principal residence or second home, and "Gifts are not allowed on an investment property." Freddie Mac publishes its own guide, and this post does not state its gift rules. Ask your lender how they apply to you.

A relative is the borrower's spouse, child or other dependent, or anyone related by blood, marriage, adoption or legal guardianship. The non-relative group is a domestic partner (or the partner's relative), someone engaged to marry the borrower, a former relative, or someone with a "long-standing familial-like or mentorship relationship" with the borrower. A friend qualifies only through that familial-like or mentorship standard, so a friend who simply wants to help is not automatically an acceptable donor.

How much of a conventional down payment can be a gift?

On Fannie Mae loans, the answer depends on loan-to-value, unit count and occupancy. If the loan-to-value is 80% or less on a one- to four-unit principal residence or a second home, no minimum contribution from your own funds is required, and all funds can come from a gift. If it is above 80% on a one-unit principal residence, the same is true. If it is above 80% on a two- to four-unit principal residence or a second home, you must make a 5% minimum contribution from your own funds, and gifts can supplement after that.

Fannie Mae's HomeReady loan has its own contribution rules in Selling Guide B5-6-02, so check them with your lender if you plan to use it. Lenders can also apply stricter requirements than the program, so ask whether yours does.

What documents do FHA and conventional lenders require for gifts?

Both require a gift letter and proof that the money moved. Fannie Mae's letter must show the dollar amount (actual or maximum), the donor's statement that no repayment is expected, and the donor's name, address, telephone number and relationship to the borrower. The FHA letter must show the donor's name, address and telephone number, the donor's relationship to the borrower, the dollar amount, and a statement that no repayment is required, and both the donor and the borrower sign and date it.

For proof of transfer, Fannie Mae accepts items such as the donor's check and the borrower's deposit slip, evidence of an electronic transfer to the borrower's account or the closing agent, or a settlement statement showing receipt of the donor's check. HUD accepts the donor's bank statement showing the withdrawal with evidence of deposit, a canceled check with evidence of deposit, a withdrawal receipt with evidence of deposit, or an electronic transfer record. If the gift arrives at settlement, HUD asks for evidence of payment to the settlement agent by electronic transfer, certified check, cashier's check or other official bank check.

When several people give, plan on one letter and one proof of transfer per donor, and ask your lender how it wants them organized. For letter contents in detail, read what a mortgage gift letter must include.

What about grants, employer help and gifts of equity?

A grant is not a personal gift. Fannie Mae covers grants from government agencies, qualifying nonprofits and lenders in a separate Selling Guide topic (B3-4.3-06), and the funds cannot come from the property seller or another interested party. Employer help is also a separate topic (B3-4.3-08): Fannie Mae allows funds provided by an employer for the down payment or closing costs on a principal residence, if the employer has an established company program and the borrower receives the funds directly from the employer. See our down payment assistance guide and how to stack gifts with assistance programs.

For FHA, HUD says only family members may provide equity credit as a gift on a property being sold to other family members.

How does Dreamfund fit in?

Dreamfund is building community gifting around these rules. Each gift is recorded with who gave it, their relationship to the buyer, and a signed no-repayment attestation. The buyer's lender decides what gift documentation it accepts, and which of your supporters are acceptable donors depends on your loan program, so check before you ask. If you are still choosing a path, start with the first-time homebuyer hub, then read how family can help with your down payment and our gift tax guide for supporters.

Sources

• HUD, FHA Single Family Housing Policy Handbook 4000.1, Update 18, last revised August 12, 2026 (Gifts, Family Member, Minimum Required Investment, Loan-to-Value Limits, Interested Party Contributions, Upfront Mortgage Insurance Premium).
• Fannie Mae, Selling Guide B3-4.3-04, Personal Gifts (February 4, 2026).
• Fannie Mae, Selling Guide B3-4.1-02, Interested Party Contributions (May 7, 2025).
• Fannie Mae, HomeReady mortgage.
• Freddie Mac, Home Possible.
• CFPB, Closing Disclosure explainer.

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