Down Payment Gift Rules: Michigan

Q: Can I use a gift and MSHDA down payment assistance together?

Yes. Michigan's MI Home Loan down payment assistance, up to $10,000 as a zero-interest deferred second that you repay only when you sell, refinance, or pay off the mortgage, stacks with FHA, conventional, VA, and USDA loans. A family gift can sit on top to cover the rest of your cash to close. You will need a 640 credit score and a completed homebuyer education course for the MSHDA piece.

The wire that almost blew up a closing in Hudsonville

I was sitting at a Hudsonville closing table last spring when the buyer's loan officer called me forty minutes before signing, asking where an extra $9,000 in the buyer's account had come from.It was a gift from her dad.Totally legitimate.But it had hit her checking account eleven days earlier with no gift letter, no record of his withdrawal, and a deposit memo that just said "thanks kiddo." We spent two stressful hours getting a signed letter and screenshots of both sides of the transfer before the lender would fund.The house was $407,000, the median for Hudsonville right now , and a $9,000 paperwork gap nearly cost her the deal.

That is the whole reason I wrote this.Gift money for a down payment is common, allowed, and usually easy.It only becomes a problem when nobody told the buyer the rules until the underwriter started asking questions.So here is exactly how down payment gifts work on a Michigan mortgage in 2026, who can give, what the paperwork has to say, and how conventional and FHA differ.

Why gifts matter more in this market

The City of Grand Rapids median sale price is $304,000, up about 10% year over year, with homes going pending in 9 days and sellers getting 98.1% of list . (Those figures are estimates from public aggregators, not MLS-certified.) When prices climb and homes move in nine days, the cash-to-close hurdle gets taller and buyers have less time to scrape it together.A 3.5% FHA down payment on a $304,000 house is about $10,640.On a 5% conventional, it is $15,200.For a lot of first-time buyers in Jenison at $372,500 or Grandville at $349,819, a family gift is the difference between buying now and waiting another year .

With 30-year rates at 6.53% as of late May 2026 , every dollar a buyer can put down without borrowing it lowers the payment and helps the debt-to-income math.A gift does that cleanly, as long as it is documented right.

Who is actually allowed to give the gift

This is where the conventional and FHA rule sets split, so I will take them one at a time.

Conventional (Fannie Mae). Under Fannie Mae's Selling Guide section B3-4.3-04, effective February 4, 2026, an acceptable donor is a relative, defined as your spouse, child, or other dependent, or anyone related to you by blood, marriage, adoption, or legal guardianship.Fannie also allows non-relatives who share a familial-like relationship: a domestic partner, a fiance, a former relative, or someone with a long-standing familial-like or mentorship relationship with you .That last category was broadened a few years back, and most buyers still do not know a close mentor or godparent can qualify.

FHA. FHA is broader on donors.The money can come from a family member, your employer, a labor union, a close friend with a clearly documented interest in you, a charitable organization, or a government agency running a homeownership program for first-time or low-to-moderate-income buyers .

The one rule that never changes. On any loan, the gift cannot come from anyone with a financial interest in the transaction closing.That means the seller, the builder, the listing agent, and the buyer's agent are all off-limits as donors .If your uncle is also the seller, his money is not a gift in the lender's eyes.

How much of the down payment can be a gift

Here is the part that surprises people.On a conventional loan for a one-unit primary residence, a gift can fund the entire down payment, all of your closing costs, and your reserves, with no minimum contribution of your own money required .You do not have to put in a nickel of your own if the whole thing is gifted from an acceptable donor.The flip side: gift funds are not permitted at all on an investment property under conventional rules .

On FHA, the entire 3.5% minimum down payment can come from gift funds, and anything extra can go toward closing costs, prepaid items, or simply stay in your account as reserves .FHA's 3.5% down applies to buyers with a credit score of 580 or higher; between 500 and 579, the minimum down jumps to 10% .Either way, the gift can cover that down payment in full.If you want help running the price-to-payment math, the affordability breakdown for Grand Rapids buyers walks through it.

The gift letter and the 60-day seasoning question

Every gift needs a gift letter.On FHA, the letter must show the donor's name, address, and phone number, the dollar amount, the donor's relationship to you, and an explicit statement that no repayment is expected .Conventional letters carry the same core information.If repayment is expected, it is not a gift, it is a loan, and the lender will count the payment against your debt-to-income ratio, which can tank the approval.

The money also cannot change hands as cash.There has to be a traceable paper trail: the donor's bank statement or withdrawal slip showing the funds leaving their account, and your deposit showing the same amount arriving .A canceled check, a wire confirmation, or an electronic transfer record all work.A stack of twenties does not.

Then there is seasoning.Money that has sat in your account for at least 60 days before you apply is generally treated as "seasoned," and the lender stops asking where it came from .A gift that lands inside that 60-day window is "unseasoned," and that is exactly when the underwriter flags it as a large deposit and wants the letter plus the transfer trail .There is no rule that you must wait 60 days.You just document a recent gift instead of leaving it to chance.That was the entire fix at my Hudsonville table: the gift was fine, it was simply unseasoned and undocumented.

Michigan-specific layers: PRE, MSHDA, and loan limits

Two Michigan items intersect with all of this.First, once you close and occupy the home as your primary residence, file your Principal Residence Exemption affidavit with the local assessor.The PRE removes up to 18 mills of local school operating tax from your bill, and it does not transfer automatically from the prior owner; you have to file your own affidavit, Form 2368, by June 1 for the summer bill .That has nothing to do with gift funds directly, but it is the single most common thing new buyers forget after a gift-funded purchase, and it can swing a tax bill by thousands a year.Our breakdown of the Principal Residence Exemption for Grand Rapids buyers covers the filing.

Second, a gift can stack with down payment assistance.Michigan's MI Home Loan program through MSHDA offers up to $10,000 in down payment assistance, structured as a zero-interest deferred second loan that you repay only when you sell, refinance, or pay off the mortgage .It requires a 640 credit score and a completed homebuyer education course, and it pairs with FHA, conventional, VA, and USDA loans .A family gift can sit right on top of MSHDA to cover the remaining cash to close.I get into the details on the MSHDA first-time buyer page and the broader Grand Rapids down payment assistance guide.

For 2026, Kent County's conforming loan limit is $832,750, and the FHA floor is $541,287 .Almost no gift-funded first-time purchase in our market gets anywhere near those ceilings, so loan limits are rarely the constraint here.The constraint is documentation.Even in Zeeland, where the median runs $370,899 , the cash to close is the real hurdle, not the loan ceiling.

What I'd do if a gift is part of your plan

Here is the order I walk buyers through.One, get the gift moved early.If the donor can transfer it more than 60 days before you apply, it seasons and you skip a whole conversation with the underwriter.Two, if it is recent, document it before you spend a dollar of it.Have the donor save their withdrawal record, and you save the matching deposit, on the same day.Three, get the signed gift letter drafted up front, not the night before closing.Four, confirm the donor qualifies for your specific loan type, since conventional is narrower than FHA on who can give.And five, never deposit gift cash.If grandma hands you an envelope, that money is unusable until it is run through a documented bank transfer, and even then it can get questioned.

If you are deciding between FHA and conventional in the first place, the gift rules can actually tip the choice, and the loan-program comparison for Grand Rapids lays the options side by side.And when you are ready to test real numbers on a specific address, send it to me — I will run the payment and taxes and put together a seller net sheet before you ever write an offer. For perspective, even Wyoming at a $290,000 median takes real cash to close, and a documented gift is often what gets a first-time buyer over the line.

FAQ

Who is allowed to gift me money for a down payment in Michigan?
On a conventional loan, the donor has to be a relative by blood, marriage, adoption, or guardianship, or a non-relative with a documented familial-like relationship such as a domestic partner, fiance, or longtime mentor.FHA adds your employer, a labor union, a close friend with a documented interest, a charitable organization, or a government agency.The one person who can never gift you the money on any loan is anyone with a financial stake in the sale, so your seller, the builder, and either agent are out.

Does the gift money have to sit in my account for a certain number of days?
If the money has been in your account for at least 60 days before you apply, lenders usually treat it as seasoned and stop asking where it came from.If it lands inside that 60-day window, it is an unseasoned gift, and the underwriter will want a signed gift letter plus a paper trail: the donor's withdrawal and your matching deposit.There is no rule that you have to wait 60 days to use a gift.You just document it instead.

How much of my down payment can be a gift on a conventional loan?
On a one-unit primary residence, a gift can cover the entire down payment, all of your closing costs, and your reserves, with no minimum amount of your own money required, under Fannie Mae's rules effective February 4, 2026.That is a change a lot of people still do not know about.The catch is that gift funds are not allowed at all on an investment property.

What does the gift letter actually need to say?
It needs the donor's name, address, and phone number, the exact dollar amount, the donor's relationship to you, and a clear statement that the money is a gift with no repayment expected.If repayment is expected, it is a loan, it counts against your debt-to-income ratio, and it can sink the approval.The letter has to be signed, and the money cannot be handed over as cash.There has to be a traceable transfer.

Can I use a gift and MSHDA down payment assistance together?
Yes.Michigan's MI Home Loan down payment assistance, up to $10,000 as a zero-interest deferred second that you repay only when you sell, refinance, or pay off the mortgage, stacks with FHA, conventional, VA, and USDA loans.A family gift can sit on top to cover the rest of your cash to close.You will need a 640 credit score and a completed homebuyer education course for the MSHDA piece.