Can You Use Gift Funds or Down Payment Assistance Toward an FHA Purchase?
When buying a home with an FHA loan, one of the most common questions buyers ask is: “Can I use gift money or down payment assistance for my purchase?” The short answer is yes — FHA loans are designed to be flexible and accessible, especially for first-time homebuyers. But there are specific rules you’ll need to follow to make sure the money is documented correctly and approved by your lender.
FHA Down Payment Requirements
FHA loans require a minimum down payment of 3.5% if your credit score is 580 or higher. For many buyers, coming up with that cash can feel like the biggest hurdle. That’s where gift funds and assistance programs can step in to help cover part or all of the requirement.
Using Gift Funds for an FHA Loan
Gift funds are one of the most popular ways to meet FHA’s down payment requirements. Here’s what you need to know:
Who Can Gift the Funds?
FHA allows gifts from family members, domestic partners, employers, labor unions, charitable organizations, or close friends with a documented interest in the borrower.
Example: A parent gives their child $10,000 to help with a down payment.
What Documentation Is Required?
A signed gift letter stating the money does not need to be repaid.
Proof of transfer, such as a bank statement or wire receipt.
What’s Not Allowed?
The gift cannot come from anyone who has a financial interest in the sale (such as the seller, builder, or real estate agent).
Down Payment Assistance (DPA) Programs in Iowa
In addition to gift funds, buyers in Des Moines and across Iowa may qualify for state and local down payment assistance programs.
Iowa Finance Authority (IFA) FirstHome and Homes for Iowans
Offers up to $2,500 in down payment and closing cost assistance for eligible buyers.
Can be combined with FHA financing if you meet income and purchase price limits.
SmartBuy Down Payment Assistance
Offers 3.5% and 5% forgivable and repayable 2nd mortgage loan options.
Forgivable options are fully forgiven after 5 years if the borrower meets specified criteria.
Military Homeownership Assistance
Eligible service members and veterans can receive a $5,000 grant toward down payment and closing costs, which can be paired with FHA financing.
Local Grants or Employer Programs
Some Des Moines employers, city programs, or nonprofits offer smaller grants or forgivable loans to help buyers with upfront costs.
How Lenders Verify Gift Funds & Assistance
Lenders are required to document the source of all funds used in the transaction. To stay compliant:
Tell Your Lender Early – Let them know if you plan to use a gift or assistance program so they can guide you on paperwork.
Provide Proof of Transfer – Avoid cash deposits; use traceable methods like checks or electronic transfers.
Submit Program Approval Letters – For down payment assistance, provide official award letters and meet all program conditions.
Why This Matters for Buyers in Des Moines
Home prices in Polk County and surrounding areas continue to rise, and saving thousands for a down payment can be tough. Using gift funds or Iowa’s available down payment assistance programs can make the difference between waiting years to buy and moving into your new home now. FHA’s flexibility is a major reason it remains one of the most popular loan types for first-time and budget-conscious buyers.
Bottom Line
Yes — you can use gift funds and down payment assistance toward an FHA purchase. As long as the money comes from an approved source and is properly documented, FHA financing allows you to minimize your own out-of-pocket expense. Combine that with Iowa’s state and local programs, and buying a home may be closer than you think.
