Gift Funds for a Down Payment: What's Allowed and What Documentation Is Required

Saving a down payment is the biggest barrier to buying a home. Fortunately, you don't always have to save the money entirely on your own. According to the National Association of Realtors, about 25% of first-time buyers use a gift from a friend or relative for some or all of their down payment.

Who Can Give You Money

Mortgage guidelines are strict about where the money comes from. Gift funds generally must come from a family member, such as a parent, sibling, child, grandparent, domestic partner, or fiancé. Funds cannot come from anyone with a vested interest in the transaction, such as the seller or real estate agent. Most importantly, gift funds must be a true gift, not a loan, and the buyer cannot be required to repay it.

Program Limits and Guidelines

Different loans have different rules for gift money. FHA loans allow gift funds to cover the entire 3.5% minimum down payment. Conventional loans allow gift funds to cover the entire down payment and closing costs for a one-unit primary residence. However, for a multi-unit property or second home, at least 5% of the down payment must come from the borrower's own funds.

Documenting the Gift

Underwriters require a clear paper trail. A gift letter is required, declaring which funds are gifted and intended for the down payment. If gift funds have been in the borrower's account at least 60 days, they're considered "seasoned," which can simplify documentation. Depositing gift funds as early as possible is highly recommended.

Talk to a Loan Officer at our Mortgage Brokerage to make sure your gift funds are documented correctly. We will help you navigate the paperwork so your down payment is ready for closing day.

Expect to close one week early.

Frequently Asked Questions

Can I use gift money for my down payment?

Yes. Many loan programs allow you to use gifted funds for some or all of your down payment and closing costs.

Who is allowed to give me gift funds for a mortgage?

Gift funds generally must come from a family member, fiancé, or domestic partner. They cannot come from anyone involved in the real estate transaction.

What is a gift letter and what does it need to say?

A gift letter is a required document signed by the donor stating the exact amount of the gift and explicitly declaring that the money is not a loan and does not need to be repaid.

How long does gift money need to sit in my account before I can use it?

Money is considered "seasoned" and easier to document after 60 days, but you can use recently deposited gift funds as long as you provide the required gift letter and transfer proof.