Whose funds can an FHA borrower use to cover closing costs?

FHA borrowers have the flexibility to use various sources of funds to cover their closing costs, and the correct choice highlights two prominent options: family gifts and grants. The Federal Housing Administration (FHA) allows borrowers to receive funds from family members, which can significantly help in covering out-of-pocket expenses associated with closing a mortgage agreement. The use of a family gift is particularly beneficial because it can reduce the financial burden on the borrower and make homeownership more accessible.

Additionally, grants from non-profit organizations or government programs are also permissible. These grants often come with specific conditions but provide valuable financial assistance without the requirement of repayment, which can ease the acquisition of a home for borrowers.

In contrast, while the borrower’s own funds may be an option, it does not represent the additional sources available, which include gifts and grants. The mention of using any third-party financial institution is too vague without specifying that the funds must be compliant with FHA guidelines. Investment income on its own does not typically cover closing costs unless it is the result of a liquidity event or conversion to cash, which is not the primary means considered for facilitating closing costs under FHA guidelines. Thus, the choice that encompasses family gifts and grants effectively provides a complete and accurate answer to the question regarding financing