By Alex Rodino, REALTOR® | Georgia real estate license #443565 | U.S. Army veteran
Last updated: October 2026
HUD’s FHA handbook requires a gift letter signed and dated by both the donor and the borrower that gives the donor’s name, address and phone number, the donor’s relationship to the borrower, the dollar amount of the gift, and a statement that no repayment is required, plus proof of how the money moved.
Permitted sources include family, employers or unions, qualifying close friends, charities, and qualifying public homeownership assistance programs. Cash on hand is not an acceptable donor source. The lender must check where the funds came from, even when a parent provides them. I tell buyers to start the gift paperwork the week they go under contract, not the week of closing.
Who can give FHA gift funds
In brief: HUD allows gifts from specified people and organizations, including Family Members and qualifying close friends. The relationship matters, and so does the source of the money. A donor’s willingness to help does not replace the lender’s documentation and source review for an FHA-insured mortgage.
The handbook’s acceptable donor list, II.A.4.d.iii(F)(2)(a), includes:
- 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.
- A governmental agency or public entity with a homeownership assistance program for low- or moderate-income families or first-time homebuyers.
HUD’s Family Member glossary entry defines the term “regardless of sex or legal marital status”:
- “child, parent, or grandparent”; a child is “a son, stepson, daughter, or stepdaughter”; a parent or grandparent includes “a stepparent/grandparent or foster parent/grandparent”.
- “spouse or domestic partner”.
- “legally adopted son or daughter, including a child who is placed with the Borrower by an authorized agency for legal adoption”.
- “foster child”.
- “brother, stepbrother”; “sister, stepsister”; “uncle, aunt”.
- “son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law of the Borrower”.
The FHA gift paperwork checklist
In brief: HUD’s FHA handbook requires a gift letter signed and dated by both the donor and the borrower that gives the donor’s name, address and phone number, the donor’s relationship to the borrower, the dollar amount of the gift, and a statement that no repayment is required, plus proof of how the money moved.
This checklist follows the handbook. It is not an official gift-letter form.
| Document | What it must show | When | Handbook section |
|---|---|---|---|
| Gift letter | Donor’s name, address, and telephone number; relationship to borrower; dollar amount of gift; statement that no repayment is required. Signed and dated by both donor and borrower. | For the lender’s gift review | II.A.4.d.iii(F)(3) |
| Transfer before settlement | One of:
|
Gift verified before settlement | II.A.4.d.iii(F)(3) |
| Transfer at settlement | Evidence of payment to the settlement agent using one of: electronic transfer from donor’s account; bank certified check; cashier’s check; or other official bank check. | Gift verified at settlement | II.A.4.d.iii(F)(3) |
| Gift of equity letter | The same four letter items, signed and dated by donor and borrower. Only Family Members may give equity credit on property sold to other Family Members. | For a family equity-gift transaction | II.A.4.d.iii(F)(4) |
Source: HUD Handbook 4000.1, II.A.4.d.iii(F) and II.A.5.c.iii(F), Update 18 (August 12, 2026), checked October 2026.
Why cash on hand does not work
In brief: HUD expressly excludes cash on hand as a donor gift source. A signed letter cannot substitute for evidence tracing the transfer. Whether the funds arrive before settlement or at settlement, the lender must reasonably determine that they did not come from an unacceptable source.
“Cash” can mean a monetary gift in everyday conversation. The handbook’s restriction concerns cash on hand as the source. Before anyone hands over bills or deposits them, ask the lender how to document the proposed gift.
Gifts of equity between family members
In brief: A gift of equity is equity credit in a property sale between Family Members. HUD limits who may provide it and requires the same letter details as a monetary gift. The donor and borrower must both sign and date that letter for the lender.
A parent selling a home to a child is a relationship to discuss with the lender under this rule. Do not assume the broader cash-gift donor list applies to equity gifts.
Gifts vs seller and agent contributions
In brief: HUD treats sellers and real estate agents as Interested Parties in the transaction. Their contributions fall under a separate rule from personal gifts. Keep a proposed seller credit and a family gift distinct when discussing the contract and the source of funds with your lender.
Under HUD Handbook 4000.1, II.A.4.d.iii(G)(2), Interested Parties may contribute up to 6 percent of the sales price toward the borrower’s origination fees, other closing costs, prepaid items, and Discount Points.
That is an interested-party contribution limit, not a personal-gift limit. For related reading, see closing costs in Georgia.
Where this shows up in a home search
In brief: Discuss the gift with your lender while planning the purchase, then coordinate the paperwork with the contract timeline. Ask which transfer route to use before the donor sends money. Early questions give you a chance to identify missing records before the planned closing date.
I focus on the home and the contract. When family help is part of the plan, I ask buyers to get the lender’s paperwork instructions early so we can keep the proposed closing date in view. A large deposit still needs its gift paper trail; the balance alone does not explain its source.
Related reading: Georgia first-time buyer programs, what a first home in Savannah really costs, and VA vs FHA vs conventional loans.
This article explains general VA and FHA program rules for education only. It is not lending, legal, tax or financial advice and is not an offer or commitment to lend. Lenders may apply stricter requirements of their own. Talk to a licensed mortgage professional about your situation. Alex Rodino is a REALTOR® with Keller Williams Realty Coastal Area Partners, Georgia real estate license #443565. Equal Housing Opportunity.
Frequently asked questions
In brief: FHA gift documentation answers separate questions: who gave the help, whether repayment is expected, and how the funds moved. Use these answers alongside the handbook checklist, then ask your lender which records it needs for your donor, transfer method, and planned settlement.
What does an FHA gift letter need to say?
An FHA gift letter must identify the donor, state the relationship and gift amount, and confirm that no repayment is required. Include the donor’s name, address, and telephone number. Both the donor and borrower must sign and date it. Those are the handbook’s letter requirements; the lender also needs the applicable transfer evidence for a monetary gift. Ask your lender for its instructions before preparing the letter.
Who can give gift money for an FHA loan?
HUD permits gifts from specified sources, including a borrower’s Family Member, employer or labor union, qualifying close friend, charitable organization, or qualifying governmental agency or public entity. The public program must provide homeownership assistance to low- or moderate-income families or first-time homebuyers. Being on that list does not settle the whole review: the lender must also document the gift and reasonably determine that its funds did not come from an unacceptable source.
Can a friend give me gift funds for an FHA loan?
HUD permits a gift from “a close friend with a clearly defined and documented interest in the Borrower.” That wording requires more than calling someone a friend in the gift letter. Ask your lender what documentation it needs for the relationship before money moves. The gift still needs the signed and dated letter, applicable transfer evidence, and review of its source. A friend’s monetary gift also differs from a gift of equity, which is restricted to Family Members.
Can the gift be given in cash?
Cash on hand is not an acceptable source of donor gift funds under HUD’s handbook. A monetary gift can still be considered, but the lender needs documentation of its source and transfer. A letter saying the money is a gift does not replace those records. Before accepting physical cash or making a deposit, ask your lender how the donor should transfer the money and which evidence it needs to keep.
How do I prove the gift money was transferred?
The required evidence depends on whether the gift is verified before settlement or at settlement. Before settlement, HUD lists bank withdrawal and deposit records, a canceled check with deposit evidence, a withdrawal receipt with deposit evidence, or evidence of an electronic donor-to-borrower transfer. At settlement, the records must show payment to the settlement agent using the listed electronic transfer or official bank-check options. Use the checklist above to discuss the appropriate route with your lender.
What is a gift of equity on an FHA loan?
A gift of equity is equity credit given by a Family Member selling a property to another Family Member. HUD restricts this type of gift to that family relationship. It also requires a letter signed and dated by the donor and borrower, with the donor’s contact information, relationship, gift amount, and statement that no repayment is required. Discuss the proposed family sale with your lender before relying on that equity credit in your purchase plans.
Buying with help from family?
In brief: I can help with your home search and contract timing while your licensed mortgage professional handles the gift and loan questions. Bring the property plans and the proposed closing timeline into the same conversation so the people handling each part know what you are planning.
Learn about buying a home with Alex, call 912-351-8935, text 912-210-8967, or contact Alex to discuss your search.
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