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Gift of equity: what it means

A gift of equity is when the person selling you the home, usually a relative, gives you part of the equity they have in it, and the gift is applied as a credit to you in the purchase. According to Fannie Mae, it can pay all or part of the down payment and closing costs, but it cannot count as reserves, and it is documented with a signed gift letter and the settlement statement.

In Spanish it is

Regalo de capital (gift of equity)

Also written as: equity gift

A pregnant woman takes groceries out of the car in front of her garage.

Verified on October 17, 2026

2 official sources

See the whole dictionary

The full explanation

On an FHA loan, only a family member selling you their home can give a gift of equity, and the gift letter must say that no repayment is required.

An example

Andrea's parents sell her their home and give her a gift of equity that covers her down payment. They sign a gift letter saying Andrea does not have to repay it, and the credit shows up on the Closing Disclosure.

You will see it in…

The gift letter, signed by the relative who is selling and by you
The Closing Disclosure, as a credit to you (gift of equity)
The purchase agreement between relatives

Words that go with it

You will rarely see this word alone. These are the ones that show up with it on the same papers.

Still confused by a paper?

A HUD-approved housing counselor can walk you through it. Agencies usually charge little or nothing, many work in Spanish, and they do not sell you anything.

What a housing counselor does See free help

Official sources

We sum up what these official sources say, in plain words. We add no rules they do not state; when a rule changes, the definition and its date change.

1. Fannie Mae · Selling Guide B3-4.3-05: Gifts of Equity (external site) · in English · Verified on October 17, 2026
2. HUD · HUD Handbook 4000.1, II.A.4: Gifts (Personal and Equity) — Standards for Gifts of Equity (external site) · in English · Verified on October 17, 2026