Using Gift Money for a Down Payment on a Home

For many aspiring homeowners, especially those eager to become first-time buyers, the dream of owning a home can feel just out of reach. Until a generous gift changes everything, that is.

Whether a family member wants to help you build your future or you’re considering asking for support, gift money for a down payment can help make homeownership a reality. A financial boost from loved ones can make it easier to secure your dream home without waiting years to save.

However, there are specific mortgage rules both you and the donor need to follow. Here’s how to turn a generous contribution into a strong foundation for your future home while following key mortgage guidelines.

Shopping around for a home? While preparing your down payment, get approved  for your mortgage so you know exactly how much home you can afford.

Can gift money be used for a down payment?

Yes, you can use gift money for a down payment.

Many home buyers receive financial help from family and even friends — as many as 39% of home buyers, according to a 2023 survey by Zillow — and lenders recognize this as a legitimate way to fund a home purchase.

The process of gifting money for a down payment does require transparency, however.

When lenders review recent bank statements to assess your financial background, any unusually large deposits made (due to gifts or otherwise) must be accounted for. And because down payment gifts are required to come with no strings attached, both you and the donor must clearly confirm that the money is truly a gift — not a loan that may hinder your ability to make your mortgage payments.

By getting to know the gifting and documentation requirements, you can confidently accept the gift and move forward with financing your new home.

Down payment gift rules by loan types

To smoothly integrate gift money into your home purchase, it’s important to understand how different loan programs manage these funds. Each mortgage type — whether conventional, Federal Housing Authority (FHA), Veterans Affairs (VA), or U.S. Department of Agriculture (USDA) — has its own guidelines for using gift money, including who can provide it and how it must be documented.

Lenders rely on these rules to ensure that gifted funds truly support the home buyer and don’t result in hidden financial obligations. While conventional loans follow guidelines set by Fannie Mae, government-backed loans like FHA, VA, and USDA have their own specific requirements.

Let’s break down how each loan type handles gift funds so you know what to expect.

Conventional loans

For home buyers using a conventional loan, Fannie Mae establishes the rules for how gift money for a down payment can be applied. These guidelines ensure that gifted funds are legitimate donations — not undisclosed loans that could impact a borrower’s financial stability.

Over time, Fannie Mae has adjusted its policies to provide greater flexibility, allowing more individuals to contribute gift funds and expanding the circumstances under which they can be used. One key aspect of these guidelines is defining who can provide a gift.

In 2022, Fannie Mae broadened its list of acceptable donors beyond immediate family members to include nonrelatives with a documented, close relationship to the borrower. The complete list is as follows:

• Spouse
• Child
• Another dependent individual
• Any blood, marriage, adoption, or legal guardianship relative
• Domestic partner
• Relative of a domestic partner
• Individual engaged to marry the borrower
• Former family member
• Godparent

FHA loans

An FHA home loan is a government-backed mortgage designed to help buyers — especially first-time homeowners — qualify with lower credit scores and smaller down payments.

According to current rules, FHA allows gifts from the same list of donors as Fannie Mae, excluding cousins, nieces, and nephews. FHA also allows gift money from your employer, labor union, a charitable organization that provides financial assistance, or any government program that assists first-time home buyers.

“FHA has a minimum down payment of three and a half percent,” adds Flynt. “That can all come from the gift, as long as the gift is pulled from an eligible source of assets. The donor can’t use a personal loan or a credit card, for instance.”

VA and USDA

VA and USDA home loans are government-backed programs that help eligible buyers purchase homes with little to no down payment. While VA loans are available to military service members, veterans, and surviving spouses, USDA loans support low-to-moderate-income buyers in rural areas.

Both programs allow gift funds to cover any down payment or closing costs from almost anyone, including family, close friends, employers, or charitable organizations. Donors cannot include those involved in the sale, such as the seller, builder/developer, or a real estate agent.

To ensure compliance, lenders require a signed gift letter confirming no repayment is expected, along with documentation of the fund transfer.

How to use gift money for a down payment

While using gift money for a down payment can make homeownership more attainable, lenders require proper documentation to verify funds. And timing matters. Following these steps will get you started in the right direction:

1. Document the gift

Documenting the gift is step one in the process, ensuring lenders recognize the funds are legitimate contributions toward your down payment. According to Fannie Mae guidelines, the following methods are acceptable for documenting gift funds:

• A copy of the donor’s check along with the borrower’s deposit slip
• A copy of the donor’s withdrawal slip alongside the borrower’s deposit slip
• Records of electronic fund transfers from the donor’s account to either the borrower’s account or the closing agent
• A copy of the donor’s check made out to the closing agent
• A settlement statement that verifies receipt of the donor’s check

2. Provide a gift letter

In addition to the documentation above, you also must document the gift with a mortgage gift letter prepared by the donor. A gift letter serves as a written confirmation to the lender that the documented funds you were given for a down payment are a true gift that will not require repayment.

Your lender may provide you with a gift letter template to make the process easier.

“AmeriSave offers borrowers a standardized gift letter template,” says Flynt. “A gift letter describes who the person is, their relationship with the borrower, and how they will give the gift — check, cash, or transfer. It’ll be signed by the donor and the borrower. Then we’ll typically get a copy of the donor’s bank statement showing that they have the funds to donate the gift and how they will transfer the funds.”

When writing the down payment gift letter, the gift giver must include the following information:

• Their name, home address, phone number, and email address
• Their relationship to you (i.e., parent, spouse, cousin, godparent, etc.)
• The address of the home you are purchasing
• The exact dollar amount of the gift
• The name of their bank and their account number
• The date the money was given to you (if by check) or transferred electronically
• A statement confirming the gift’s nature, stating it does not require repayment
• Their printed name and signature

3. Plan the timing of your gift

If the gift is deposited into your account more than 60 days before you apply for the loan, your mortgage lender will consider it to be “seasoned money.”

The advantage of seasoned money is that it largely falls outside the lender’s scope of scrutiny. This means if you receive the gift in your bank account at least 60 days before your loan application, you may not need to provide the documentation or gift letter described above. This is something to keep in mind when timing your gift and mortgage application.

“We only ask for the previous two months of bank statements,” says Flynt. “So, if the gift was deposited into the bank account before the last two months’ statements — which is generally 60 days — that money is considered ‘seasoned.’”

4. Remember the tax implications of a mortgage gift

While gifting typically has no tax implications for the recipient, the donor may need to report the gift on their tax return. The 

In all cases, whether you’re the gift recipient or the donor, consult with a certified tax professional for guidance.*

Alternatives to a down payment gift

If a relative or loved one gifting money for a down payment isn’t an option for you, several other alternatives exist that may allow you to secure a home loan without the traditional 20% down. These options provide flexibility based on your financial situation and home buying goals.

• Gift of equity: If a family member or close friend is selling you their home below market value, the difference between the appraised value and the sale price may be used as a gift of equity. This can cover all or part of the down payment, following similar documentation requirements as a cash gift.
• Zero-down-payment mortgages: VA and USDA loans offer eligible buyers the ability to purchase a home without a down payment. Both programs provide an affordable path to homeownership without upfront cash requirements. Unlike VA loans, however, USDA loans require borrowers to pay guarantee fees, a form of mortgage insurance that protects the lender.
• Low-down-payment mortgages: Conventional loans backed by Fannie Mae and Freddie Mac — called conventional 97 loans — offer options with as little as 3% down, while FHA loans require just 3.5% down. These programs enable buyers to enter the market with minimal savings while maintaining manageable monthly payments. Be aware, however, that conventional loans typically require borrowers to pay for private mortgage insurance (PMI), which can be removed once the borrower reaches 20% equity. FHA loans require mortgage insurance premiums (MIP), which last the life of the loan.
• Down payment assistance programs: Many state and local housing agencies offer grants or low-interest loans to help with down payments and closing costs. These programs often target first-time home buyers and lower-to-moderate-income applicants. Contact your local housing authority and consult a mortgage broker for further guidance.

Whether you’re using gift money for a down payment or considering low-down-payment mortgages, AmeriSave’s mortgage experts can guide you through the required steps and qualifications.

FAQs

Can a friend gift me money for a down payment?

For a conforming loan, a close friend of your family — specifically, a godparent — can give you gift money for a down payment. FHA loans are more relaxed about gifts from “friends” and accept gift money from employers, charitable organizations, and others.

Can family members gift money for a down payment without tax implications?

The IRS gift exclusion for 2024 is $18,000 (it increased to $19,000 for 2025), meaning any gift above that amount must be reported and may have tax implications.

Who can gift money for a mortgage down payment

According to the current guidelines from Fannie Mae, the following individuals can provide gift money for a down payment for a conforming loan:

• Spouse
• Child
• Other dependent individuals
• Any relative connected by blood, marriage, adoption, or legal guardianship
• Domestic partner
• Relative of a domestic partner
• Individual engaged to marry the borrower
• Former family member
• Godparent

Are there limits on how much money can be gifted for a down payment?

For single-family, primary resident homes, there are no set limits on how much can be gifted for a down payment. However, lenders may have restrictions based on loan type. Some programs allow the entire down payment as a gift, while others require the borrower to contribute their own funds.

Can I use gift funds for an investment property?

Gift money cannot be used for investment properties financed with a conforming loan. However, it can be used for a primary residence with one to four units, or a second home.

*Any tax information provided in this article is for general purposes only and should not be relied on or construed as tax advice. Consult with a qualified tax preparer for more information.