FHA gift funds from grandparents-in law?

[Anonymous]

Hello,

I joined this forum because I am starting my journey towards becoming a first time homeowner in Missouri.

I've been talking to a local lender to get prequalified before looking for a house.  I was finally prequalified but was told that my gift funds couldn't come from a grandparent in-law for an FHA loan because my husband will not be on the loan, just me.  I was told that the funds for the down-payment would need to come from my 401k, since that's my only other option.

I wanted to see what people here say, to make sure I'm being told correctly, and also to see what my options are in regards to receiving money from my husbands grandparents to go towards our new home.

Thanks for any help you can offer!!

-Richard

[JVille]

I say Bull Pucky! Is this an FHA loan?

[JVille]

approval is that the borrower provide a minimum cash investment--a down payment--of at least 3.5%.

That money is required to be verified by the lender as having come from an approved source. What is an approved source? The borrower can tap into his or her own cash reserves, cash-in investments, savings bonds or other holdings. The idea behind verifying the source of your down payment on an FHA mortgage is to prevent borrowers from provided money obtained from non-collateralized loans such as a credit card cash advance, payday loans, etc.

Down payment funds may also come from someone else in the form of a gift, so long as that gift and the giver meet certain FHA requirements. In order to establish whether a particular gift of down payment money is permitted, we have to examine what the FHA describes as a bona fide gift. According to HUD 4155.1 Chapter Five Section B, In order for funds to be considered a gift, there must be no expected or implied repayment of the funds to the donor by the borrower.
READ HERE!!!!!
Then there's scrutiny of the gift giver. According to Chapter Five, An outright gift of the cash investment is acceptable if the donor is
-the borrower's relative
-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 that has a program providing home ownership assistance to low- and moderate-income families, or first-time homebuyers.
The FHA doesn't just list who may give such a gift--it also has rules discussing who MAY NOT provide gift funds for an FHA loan down payment. The gift donor may not be a person or entity with an interest in the sale of the property, such as
the seller
the real estate agent or broker
the builder
an associated entity
Gifts from these sources are considered inducements to purchase, and must be subtracted from the sales price.

FHA loan rules are specific and clear in these areas to insure fairness and to preserve the integrity of the home buying process with FHA loan funds. For more information on how these rules may apply to your situation, ask the loan officer or contact the FHA directly.

[Anonymous]

Yes, it's an FHA loan.

My husbands grandparents have offered to give us up to 20K, or whatever the max allowed amount is, to go towards our house.

[JVille]

This is easier to read, your Father in Law is a relative. Read the FHA guidelines

According to HUD 4155.1 Chapter Five Section B, In order for funds to be considered a gift, there must be no expected or implied repayment of the funds to the donor by the borrower.

Then there's scrutiny of the gift giver. According to Chapter Five, An outright gift of the cash investment is acceptable if the donor is
-the borrower's relative
-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 that has a program providing home ownership assistance to low- and moderate-income families, or first-time homebuyers.

[JVille]

You need a lender who has more knowledge.

[Anonymous]

Thanks for your help,

I'll contact him and ask him to clarify why the gift funds won't work.

What he told me was, "per FHA, the down payment cannot come from a grandparent – in law unless your spouse was on the loan."

[JVille]

He is wrong. Tell he to look up,
HUD 4155.1 Chapter Five Section B, 2019 revision. If this is an additional requirement (overlay) of his bank then you need to change lenders. Do not use your 401K
The FHA Guidelines specifically say this:

Chapter Five, An outright gift of the cash investment is acceptable if the donor is
* -the borrower's relative
* -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 that has a program providing home ownership assistance to low- and moderate-income families, or first-time homebuyers.

Note: your husbands grandparents are certainly more closely related than a Friend referenced above. They are relatives (FHA does not say Blood relative anywhere in their regs).

[Anonymous]

I'm assuming you are speaking of the 401k loan. Take the money out of the 401k to put towards the mortgage. Then use the gift from your relative to pay off the 401k loan.

[JVille]

They should not have to go to those extremes! Stupid when the Gift is clearly allowed.

The chapter 5 section of HUD 4155.1 says the following gift donors are approved sources for FHA gift funds:

A relative
A close friend
The borrower’s employer or labor union
A charitable organization without tax exempt status
A government agency or public entity that has a program providing home ownership assistance to low- and moderate-income families, or first-time home buyers.