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FHA loans · HUD Handbook 4000.1FHA gift funds rules: who can give, the gift letter and how the money moves

FHA allows broader donors than conventional loans. Under HUD Handbook 4000.1, gifts may come from 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; or a government agency or public entity with a homeownership program for low- or moderate-income families or first-time buyers. Cash on hand is not an acceptable source of a donor's funds. The gift letter must be signed and dated by both the donor and the borrower and show the donor's name, address and phone number, relationship, the dollar amount and that no repayment is required. The lender documents the transfer – before settlement from the donor's account into the borrower's, or at settlement by wire, certified, cashier's or other official bank check to the settlement agent. Only family members may give a gift of equity on a home sold to another family member.

Acceptable donors (HUD 4000.1)

  1. Family

    Child, parent, grandparent, spouse or domestic partner, adopted or foster child, sibling or step-sibling, uncle, aunt, and in-laws.

  2. Employer or union

    The borrower's employer or labor union.

  3. Close friend

    With a clearly defined and documented interest in the borrower.

  4. Charity

    A charitable organization.

  5. Government

    An agency or public entity with a homeownership program for low- or moderate-income families or first-time buyers.

The gift letter – signed and dated by donor and borrower

  • Donor's name, address and telephone number.
  • Donor's relationship to the borrower.
  • The dollar amount of the gift.
  • A statement that no repayment is required.

Proof of the transfer

  • Before settlement: the donor's bank statement showing the withdrawal, a canceled check, a withdrawal receipt or an electronic transfer – plus evidence of deposit into the borrower's account.
  • At settlement: a wire from the donor's account, or a certified, cashier's or other official bank check to the settlement agent.
  • Cash on hand is not accepted as the donor's source of funds.
  • Gift of land: proof the donor owned it and evidence of the title transfer.

Questions buyers ask

Can a friend give me gift money for an FHA loan?

Yes, a close friend with a clearly defined and documented interest in the borrower is an acceptable donor (HUD Handbook 4000.1).

Who signs an FHA gift letter?

Both the donor and the borrower sign and date it; it lists the donor's contact details, relationship, the amount and that no repayment is required.

Who can give a gift of equity on an FHA loan?

Only family members, on a home being sold to another family member.

Related guides

Request the FHA gift letter and transfer proof in ClosingCode with an upload link in the donor's language – English or Spanish.

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Source: HUD Handbook 4000.1, FHA Single Family Housing Policy Handbook, Gifts (Personal and Equity) and Family Member definition, last revised August 12, 2026 (hud.gov, read October 25, 2026).

General information about FHA-insured loans, not legal or financial advice. Lenders can add stricter rules (overlays). ClosingCode is software; it is not a lender. This guide is not a substitute for the advice or services of an attorney.