If you’ve been saving for a home but haven’t quite built up enough for a down payment or closing costs, you’re not alone. One of the questions I hear most often from first-time homebuyers is:

“Can my parents or another family member give me money to buy a house?”

The answer is yes—in many cases, gift funds can be used to purchase a home.

Whether you’re buying your first home or your next one, gift funds can make homeownership possible sooner than you expected. Here’s what Michigan homebuyers need to know.

What Are Gift Funds?

Gift funds are money given to you by an eligible donor to help with your home purchase. Unlike a loan, gift funds do not have to be repaid.

Many buyers receive help from:

• Parents
• Grandparents
• Siblings
• Children
• Fiancés or domestic partners (depending on the loan program)
• Other eligible relatives

Gift funds may be used for:

• Down payment
• Closing costs
• Prepaid taxes and insurance
• Sometimes even required cash reserves

The rules vary depending on the mortgage program.

FHA Loans and Gift Funds

FHA loans are among the most flexible loan programs when it comes to gift funds.

In many situations, 100% of your required investment can come from an eligible gift.

That means you may not need to contribute your own money toward the down payment if the gift meets FHA guidelines.

Your lender will typically need:

• A signed gift letter
• Documentation showing where the funds came from
• Evidence the money was transferred to you or directly to the closing agent

For many first-time buyers in Michigan, FHA loans combined with gift funds can significantly reduce the upfront cost of purchasing a home.

Conventional Loans and Gift Funds

Conventional loans also allow gift funds, but the rules can vary depending on several factors, including:

• Down payment amount
• Occupancy type
• Property type
• Credit profile

Many conventional borrowers can use gift funds for all or part of their down payment and closing costs.

Certain situations may require the borrower to contribute some of their own funds, while others allow the entire down payment to come from an eligible gift.

Every scenario is unique, which is why it’s important to review your options before assuming you need years of savings.

VA Loans

Eligible veterans and active-duty service members generally don’t need a down payment with a VA loan.

However, gift funds can still be helpful by covering:

• Closing costs
• Prepaid expenses
• Funding fee (when applicable)

This can dramatically reduce the amount of cash needed at closing.

USDA Loans

USDA loans also offer 100% financing for eligible rural properties.

Although no down payment is required, buyers are still responsible for certain closing costs and prepaid items.

Gift funds may often be used to help cover these expenses, making homeownership more affordable for qualified buyers.

Who Can Give Gift Funds?

Eligible donors typically include immediate family members and certain other individuals with a documented relationship to the borrower.

Examples include:

• Parents
• Grandparents
• Brothers and sisters
• Children
• Aunts and uncles
• Legal guardians
• Fiancés or domestic partners (depending on program guidelines)

Your mortgage professional can explain whether a particular donor is eligible for your loan program.

What Is a Gift Letter?

A gift letter is a document confirming that the money being provided is exactly what it says—a gift.

It generally includes:

• Donor’s name
• Borrower’s name
• Gift amount
• Property address
• Relationship between donor and borrower
• Statement that repayment is not expected
• Signatures

This documentation helps satisfy underwriting requirements and ensures the funds comply with mortgage guidelines.

Can Gift Funds Be Cash?

Generally, no.

Cash deposits without a documented source can create problems during underwriting.

The cleanest approach is having funds transferred through the banking system so there is a clear paper trail.

Your lender will explain the preferred process before funds are moved.

Common Mistakes to Avoid

One of the biggest mistakes buyers make is moving money before talking with their lender.

Avoid:

• Large unexplained cash deposits
• Borrowing money and calling it a gift
• Waiting until the last minute to document transfers
• Assuming every loan program has the same rules

Planning ahead can save time and reduce stress during underwriting.

If you’re just beginning your homebuying journey, our First-Time Home Buyer Guide explains the mortgage process from pre-approval through closing.

Combining Gift Funds With Down Payment Assistance

Many Michigan buyers don’t realize that gift funds may be used alongside certain down payment assistance programs.

Depending on the loan program and assistance available, this combination can significantly reduce your out-of-pocket costs.

Every assistance program has its own guidelines, so it’s important to review your options early in the process.

The Bottom Line

Not having enough money saved doesn’t always mean you have to postpone buying a home.

Gift funds have helped thousands of buyers purchase a home sooner by reducing the upfront cash required for closing.

Whether you’re considering an FHA, Conventional, VA, or USDA loan, understanding the gift fund rules can help you make informed decisions and avoid unnecessary delays.

If you’re wondering whether gift funds can be part of your home purchase, BrightSide Lending is happy to answer your questions and help you explore the mortgage options available throughout Michigan.