Using Gift Funds for a Mortgage Down Payment

Gift fund rules by program

• FHA: 100% of the down payment can come from gift funds. The gift must be from a family member, employer, labor union, or charitable organization. No repayment can be required.
• VA: Gift funds are acceptable. No minimum borrower contribution required. The gift must be documented with a gift letter.
• USDA: Gift funds are acceptable. No minimum borrower contribution required.
• Conventional (primary residence, 20%+ down): 100% of the down payment can come from gift funds.
• Conventional (primary residence, less than 20% down): Gift funds are acceptable; no minimum borrower contribution required for most scenarios.
• Conventional (second home or investment property): Gift funds are not allowed. The borrower must use their own funds.

Who can give a gift

For conventional loans, acceptable gift donors include: family members (parents, siblings, grandparents, aunts, uncles, children), domestic partners, and fiancés. For FHA, the list is broader and includes employers and charitable organizations.

Gifts from friends (non-family) are not acceptable for conventional loans. Gifts from interested parties (the seller, real estate agent, or builder) are not acceptable for any program — those are treated as seller concessions, not gifts.

Documentation requirements

Gift funds require a gift letter signed by the donor that includes:

• The donor's name, address, and relationship to the borrower
• The amount of the gift
• The property address
• A statement that no repayment is required or expected

In addition to the gift letter, lenders will verify the transfer of funds. This typically requires bank statements showing the withdrawal from the donor's account and the deposit into the borrower's account. Large deposits in the borrower's account that aren't documented will be questioned by underwriting.

The gift should be transferred before closing — ideally 60+ days before application to avoid the "large deposit" documentation requirement. If the gift is transferred close to closing, the full paper trail (donor's bank statement + transfer documentation) will be required.