For most buyers, saving up for their down payment ranks high on the list of things that stress them out when buying a home. The idea of saving up 20% for a home sounds a bit daunting, especially when you consider that the median sale price of a Tucson home in December 2021 was $313,000. If you consider putting 20% down, that translates to $62,600. Fortunately, some mortgage programs allow you to put as little as 3% down. But keep this in mind: the more you put down, the less you pay each month. Sometimes, you may receive a generous gift of money from a close friend, family member, or even your employer when searching for a Tucson home. Can this be used as part of your down payment? Most of the time, yes. But there are conditions involved. 

Whether or not you can use gifted funds as part of your down payment when buying a house depends on who the money came from, how much it was, and which loan you use.

Using Monetary Gifts as Part of Your Down Payment

Some Limitations

Search Tucson homes for saleNo matter which type of loan you use (conventional, FHA, or VA), lenders want to know where the money came from. First of all, lenders look at how much the gift is. Next, they look at the source. Gifts from friends and employers may be rejected by lenders. However, a family member related by either blood or marriage is OK. A letter must be included explaining that the money is indeed a "gift" and not something the giver expects to be paid back. Plus, if you receive the gift within 60 days of your mortgage application, the source of the funds must be verified and the funds need to be "seasoned". In other words, that money must sit in your bank account for at least 60 days before you use it for your down payment.

Conventional Loans and Gifted Money

You may use gifted funds as long as they come from an acceptable source. This includes family members. "Family members" in this context means parents, siblings, children, grandparents, in-laws, and domestic partners.

FHA Loans and Gifted Money

FHA loans allow family members to gift buyers money to use as part of their down payment as well. In addition to family members, they also allow gifted funds from friends, an employer or labor union, a charitable organization (one who operates without a tax-exempt status), or a homeownership assistance program. On the flip side, you cannot use monetary gifts received from the seller, the agent or broker, the lender, or the builder. In fact, funds received from anyone involved in the home's sale (other than the buyer, of course) cannot be used for the buyer's down payment.

VA Loans and Gifted Money

If you currently serve in or are retired from the military, you may qualify for a zero-down VA loan. However, if you do put money down, it lowers your monthly payment. Therefore, you might want to consider doing this. Fortunately, since a down payment is not required, lenders are much less strict with using gift funds. Even so, they will not allow a gift from anyone involved in the real estate transaction, such as the agent or seller.

In conclusion, whether or not you can use monetary gifts depends on the source and the amount gifted as well as which loan you use to purchase your Tucson home. Many times, these gifted funds may also be used for your closing costs. Talk to your lender about your options. And thank whomever it was that graciously gifted you money so that you could buy your Tucson home.

Rebecca Schulte, Schulte Real Estate Group, Your Source for Tucson Real Estate