Using Gift Funds for Your Down Payment

A down payment gift from family is a common way first-time buyers bridge the savings gap. But lenders have specific rules about gift funds, and missing them can delay or derail your loan.

FHA (Federal Housing Administration) loans: family members, your employer or labor union, a close friend with a clearly documented interest in you, charitable organizations, and government assistance programs. Conventional loans under Fannie Mae rules: relatives by blood, marriage, adoption, or legal guardianship, a fiancé or domestic partner, and others the lender's rules allow, such as a godparent; on a one-unit home you will live in, the whole down payment can be a gift, while a two- to four-unit home with less than 20% down needs some of your own funds. VA and USDA loans have their own guidelines. The gift must be a true gift, not a loan to be repaid, or the lender will flag it.

Your lender will require a gift letter signed by the donor stating the amount, the donor's name, address, phone number, and relationship to you, and that no repayment is expected; many lenders also ask for the property address. The lender will also document the transfer, such as the donor's bank statement, a copy of the check or wire, or proof the money went to escrow. Your lender will give you their template.

Do not deposit a cash gift; lenders ask about large deposits on your recent statements, and cash is hard to trace. Send the gift by check or wire, and tell your lender before the money moves. Do not mix gift funds with other money in a way that blurs the source. Do not accept gifts from anyone with a stake in the sale, such as the builder or real estate agent. A gift above the IRS annual exclusion ($19,000 per recipient in 2026) means the donor files a gift tax return, though tax is rarely owed, and California has no gift tax.

• ✓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 by check or wire for a clear paper trail
• ✓Do not deposit cash gifts — plan the timing and transfer with your lender