Using Gift Funds for Your Down Payment
Receiving a down payment gift from family is one of the most common ways first-time buyers bridge the savings gap. But lenders have specific rules about gift funds, and breaking them can delay or kill your loan.
Who Can Gift
FHA (Federal Housing Administration) loans: family members, employers, labor unions, close friends (with documentation of the relationship), and charitable organizations. Conventional loans: family members, domestic partners, and fiances. VA (Department of Veterans Affairs) and USDA (U.S. Department of Agriculture) have their own guidelines. The gift must be a true gift — not a loan that needs to be repaid. If the lender suspects it is a disguised loan, they will flag it.
The Gift Letter
Your lender will require a signed gift letter that states: the dollar amount, the donor's name and relationship to you, the property address, and a statement that no repayment is expected. The donor may also need to provide bank statements showing they had the funds available. Your lender will give you the exact template they need.
Common Mistakes
Do not deposit a large cash gift into your account right before applying — lenders will ask about any large deposits in the last 60 days. Have the gift transferred via check or wire with a clear paper trail. Do not commingle gift funds with other money in a way that makes the source unclear. And do not accept gift funds from anyone who is involved in the transaction (the seller, the real estate agent, etc.).
Key Takeaways
- ✓Gift funds must be a true gift — not a loan to be repaid
- ✓A signed gift letter with specific details is required by your lender
- ✓Transfer gift funds via check or wire for a clear paper trail
- ✓Do not deposit large gifts right before applying — plan the timing with your lender
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