Most lenders allow gifts from family members, but not from anyone with a financial stake in the sale
You can accept down payment money from a parent, grandparent, sibling, or other relative without restriction. You can also receive gifts from close friends, godparents, or in-laws. The key rule is that the person giving you the money cannot be involved in the transaction itself — they cannot be the seller, the real estate agent, the loan officer, or anyone else profiting from the deal.
Lenders require a gift letter from whoever gives you the money. This is a straightforward document stating that the funds are a gift, not a loan you have to repay. The letter must include the giver's name, address, relationship to you, the dollar amount, and a statement that no repayment is expected. Both you and the gift giver sign it. Your lender will provide a template or specific wording they need.
The lender will also ask for proof that the money actually came from the person who signed the letter. This usually means a bank statement showing the transfer, or a cancelled check. If the gift giver withdrew cash and handed it to you, the lender may ask for a statement from their bank showing the withdrawal, plus your bank statement showing the deposit. This step exists to prevent money laundering and to confirm the funds are genuinely a gift and not a hidden loan.
Key Takeaways
- Family members and close friends can gift down payment money, but the giver cannot be the seller, agent, or anyone else profiting from the sale.
- Your lender requires a signed gift letter stating the money is a gift with no repayment expected, using the lender's template or wording.
- You must provide bank statements or cancelled checks proving the money came from the person who signed the gift letter.
- Some lenders require the gift giver to have a bank account in the same country as yours, and some limit how much of your down payment can be a gift.
- Employers, charities, and government programs can sometimes provide down payment information, but these follow different rules than personal gifts.
Who cannot give you down payment money
The seller of the home cannot gift you money for the down payment. Neither can the real estate agent, the mortgage broker, the home inspector, the appraiser, or anyone else earning a commission or fee from the sale. This rule exists because if the seller or agent were funding your down payment, they would have a financial incentive to inflate the home's price, which harms both you and the lender.
Some lenders also restrict gifts from people with no clear relationship to you. If you receive money from someone you cannot explain your connection to, the lender may reject the gift letter or ask for additional documentation. A coworker you barely know, a casual acquaintance, or someone you met online may trigger extra scrutiny.
Borrowed money does not count as a gift. If you take out a personal loan, a credit card advance, or a line of credit to fund your down payment, you must disclose this to your lender. These debts affect your debt-to-income ratio and may reduce the amount you can borrow for the mortgage itself.
What happens after you receive the gift
Once the lender approves your gift letter and verifies the funds, the money sits in your bank account until closing day. You cannot spend it on anything else — the lender will check your account again before closing to make sure the down payment amount is still there. If you withdraw part of it to pay a bill or make another purchase, you will need to explain where that money went and provide proof that you replaced it with your own funds.
The gift does not affect your credit score or credit report. It does not appear on your credit history because it is not a debt. However, if the gift giver is also a co-borrower on your mortgage (for example, a parent co-signing the loan), their credit and income will be part of the process.
After closing, the gift has no ongoing effect. You own the home outright with respect to the gift — there is no obligation to the person who gave you the money, and they have no claim to the property.
Down payment information programs that work like gifts
Some employers, nonprofits, and government agencies offer down payment information that functions as a gift rather than a loan. These programs give you money with no repayment required. Examples include employer homebuying programs (common at large corporations and government agencies), nonprofit grants through organizations focused on affordable housing, and state or local down payment information programs.
These programs have their own rules about who can receive the money and how much. Some are limited to first-time homebuyers, some to people below a certain income level, and some to purchases in specific neighborhoods. You will need to research programs in your area and provide documentation of your income, employment, or other factors the program requires.
When you receive information from one of these programs, you still need a gift letter, and your lender still needs to verify the funds. The process is the same as a personal gift, except the letter comes from the program administrator instead of a family member.
Gifts from outside the United States
If the gift giver lives outside the U.S., most lenders require the money to be transferred to a U.S. bank account before you use it for your down payment. International wire transfers can take several days and may involve currency conversion fees. You will need to provide documentation of the transfer, including the wire confirmation and your bank statement showing the deposit.
Some lenders have additional requirements for international gifts, such as proof that the gift giver has a legitimate bank account or that the funds are not from a sanctioned country. Ask your lender about their specific rules before you arrange the transfer.
Limits on how much of your down payment can be a gift
Most conventional loans (those not backed by the federal government) allow your entire down payment to be a gift. However, some lenders require you to contribute at least 5 to 10 percent of the purchase price from your own funds. This is called a "skin in the game" requirement, and it means the lender wants to see that you have some of your own money at risk.
FHA loans (backed by the Federal Housing Administration) allow your entire down payment to be a gift, with no minimum contribution required from you. VA loans (for military members and veterans) also allow 100 percent gift down payments. USDA loans (for rural properties) typically allow the full down payment as a gift as well.
Check with your lender about their specific policy. If they require a minimum contribution from you, ask whether you can use a gift for the rest.
What to do if the gift falls through
If the person who promised to give you money changes their mind or cannot follow through, you have limited options at that point. If you are already in contract on a home, you may be able to renegotiate the purchase price with the seller, find another gift giver, or delay closing while you save the money yourself. Some purchase contracts include contingencies that allow you to back out if you cannot find financing, but this depends on what you and the seller agreed to.
The best protection is to have the gift conversation and the gift letter signed well before you make an offer on a home. This way you know the money is real and committed before you enter a contract.
Frequently Asked Questions
Can my parents gift me money if they are also co-signing my mortgage?
Yes. If your parents are co-borrowers on the loan, they can still gift you down payment money. You will still need a gift letter from them, and the lender will still verify the funds. The fact that they are also on the mortgage does not change the gift process.
Do I have to tell the gift giver's bank where the money is going?
No. The gift giver's bank does not need to know the money is for a down payment. However, if the amount is large (typically over $10,000), the bank may file a Currency Transaction Report for compliance purposes. This is routine and does not affect you or the gift giver.
What if I receive money from multiple people?
You can receive gifts from multiple sources. You will need a separate gift letter from each person, and your lender will need to verify each transfer. Make sure each gift letter clearly states the amount and that it is a gift with no repayment expected.
Can I accept a gift if I am not a first-time homebuyer?
Yes. There is no restriction on gifts based on whether you have owned a home before. The gift rules are the same for all buyers.
What if the gift giver wants to be paid back later?
That is not a gift — it is a loan, and you must disclose it to your lender. If you tell the lender the money is a gift when it is actually a loan, you are committing fraud. The lender will count the repayment obligation as a debt, which affects your debt-to-income ratio and may reduce the amount you can borrow.