There are now both FHA and conventional loans which allow parents to gift or lend to their children some or all of the down payment and closing costs on a new home.

     If your parents lend you the money, you must qualify with the payment on the loan (along with your mortgage payment and any other debt payments).  Generally, the loan must be amortized over a period of five years or longer (interest-only notes are not allowed).  If you receive funds by gift, both you and your parents must sign a “gift letter” certifying that no repayment of the gift is expected or implied.

     Some loans for conventional financing have income limitations, unless the gift is equal to or greater than 20% of your home’s purchase price.  FHA loans, unlike conventional loans, typically have loan amount limits that vary with geographic area.  You would be wise to discuss all of the options with your mortgage lender to find out which loan program best meets your individual needs.