The down payment for an FHA mortgage can be 100% gift funds. This is one of the key benefits to the FHA program.

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. The portion of the gift not used to meet closing requirements may be counted as reserves.

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 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, or an associated entity.

Gifts from these sources are considered inducements to purchase, and must be subtracted from the sales price.