When can funds gifted from parents be considered for a down payment?

Funds gifted from parents can generally be considered for a down payment under certain conditions, which is why considering the buyer's additional financial resources is significant. Many lenders, especially those offering conventional loans or other types of financing apart from FHA loans, want to ensure that the borrower has a stable financial profile.

When applicants demonstrate additional resources—such as savings, income, or assets—they can strengthen their loan application and indicate that they can handle the mortgage payments and other costs of homeownership. This assurance allows lenders to accept gifted funds as part of the down payment, subject to their specific requirements.

For instance, with FHA loans, there are specific guidelines regarding gifted funds, including the use of a "gift letter" confirming that the funds are indeed a gift and not a loan that must be repaid. However, in the broader context of residential financing, showing additional resources helps establish the buyer's overall financial responsibility and capability. Thus, it is necessary for buyers to provide background and context regarding their financial situation when using gifted funds for a down payment.