Many lenders point out that the IRS has very specific requirements for cash gifts to family members. These requirements naturally apply to gifts of money from parents to their children for the purchase of a home. The FHA is an agency of the federal government. This can be a real advantage to the son or daughter who is a first time homebuyer. When giving a gift for the purchase of a home, you must remember that you are not making a loan to the person.
Many lenders have a gift letter they require a donor to complete during the loan process.
This form letter asks for the amount of the gift, the relationship between the donor and the recipient, and account information pertaining to where the funds are currently located. The letter also requires the donor to confirm that the funds being donated are a true gift for which no repayment whatsoever is ever expected from the recipient. This is very important, because many parents are willing to loan their son or daughter money to purchase a home. However, they are far less willing to simply give them the money as an outright gift. Another option for parents of first time homebuyer children to consider is a gift of equity.