Down payment
Using gift money for a down payment: rules and gift letters
Quick answer
Most loan types let you use gift money from family for some or all of your down payment and closing costs. The donor signs a gift letter stating the amount, their relationship to you, and that no repayment is expected, and you document the transfer with bank records. On a conventional loan for a one-unit primary home, the entire down payment can be a gift.
Gift funds are one of the most common ways first-time buyers cover a down payment. Lenders allow them, but they need to be certain the money is truly a gift and not a loan that adds to your debts. That's what the gift letter and paper trail prove.
Who can give you gift money
| Loan type | Acceptable donors (general) |
|---|---|
| Conventional | Relatives by blood, marriage, adoption or guardianship; fiancé or domestic partner |
| FHA | Family, employer or labor union, close friend with a documented relationship, charitable organization, government agency |
| VA | Generally anyone without an interest in the sale |
| USDA | Family, employer, and others without an interest in the sale |
The donor can't be anyone with a stake in the transaction, such as the seller, the builder or the real estate agent.
How much can be a gift
- Conventional, one-unit primary home: 100% of the down payment and closing costs can be gifted
- Conventional, 2–4 units or second home: with less than 20% down, you usually need 5% of your own funds
- Conventional investment property: gifts generally not allowed
- FHA, VA and USDA: the full amount can typically be gifted
What the gift letter must include
- Donor's name, address and phone number
- Donor's relationship to you
- Exact gift amount
- Date the funds were or will be transferred
- A statement that no repayment is expected
- The property address (if known)
- Signatures of the donor and borrower
Your lender will usually provide its own gift letter form. Use it.
The paper trail
Lenders typically want to see the money leave the donor's account and arrive in yours (or go directly to the title company). Expect to provide the donor's bank statement showing the withdrawal, a copy of the check or wire confirmation, and your bank statement showing the deposit. Cash gifts are very hard to document — always transfer by check or wire.
A real example
A buyer purchasing a $320,000 home with a conventional loan needs $9,600 (3%) down plus about $8,000 in closing costs. Her parents give $15,000 by wire, sign the lender's gift letter, and provide a bank statement showing the transfer. She covers the remaining $2,600 from her savings.
Do gifts trigger taxes?
The person giving the gift, not the buyer, is responsible for gift tax rules. In 2026, a donor can give up to $19,000 per recipient without filing a gift tax return. Larger gifts usually just require a filing and count against a $15 million lifetime exemption, so tax is rarely owed. Married donors can each give $19,000. Check with a tax professional for your situation.
Frequently asked questions
When should the gift money be deposited?
Ask your lender first. Some prefer it deposited before you apply so it appears on your statements; others prefer it wired directly to the title company at closing. Either works with proper documentation.
Can a gift come from a friend?
On FHA loans, yes, if you can document a close relationship. Conventional loans generally limit gifts to relatives, fiancés and domestic partners.
Does gift money affect my debt-to-income ratio?
No, as long as it's a true gift. That's why the letter must say no repayment is expected. A loan from family would count as debt.
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