Fourteen percent of current homeowners received a gift from family or friends to put toward the down payment and closing costs on their first home, according to Bankrate’s Down Payment Survey.

If you receive gifted funds toward your down payment, mortgage lenders typically require a gift letter. This documents the source of the funds, among other information. Here’s what you need to know about gift letters.

What is a gift letter for a mortgage down payment?

A mortgage gift letter is a document that describes where some — or all — of a borrower’s down payment funds came from. It also verifies that the giver doesn’t expect repayment.

At minimum, a gift letter should include:

• The giver’s name and relationship to the borrower
• The dollar amount of the gifted funds along with the date the funds were given
• The source of the gifted funds, including account statements
• The purpose of the gifted funds
• The address of the home (if an offer is already in place)
• Language indicating the borrower doesn’t have to pay back the gifted funds
• Language indicating the giver won’t have an ownership claim to the home, now or in the future

Learn more: Current mortgage rates

Why lenders want to see a gift letter

When a mortgage lender underwrites a loan application, they’re trying to discern whether you can afford the loan. If the funds you receive toward your down payment are not a gift, but a loan that you’ll have to pay back, that impacts your debt-to-income (DTI) ratio and how much you can realistically spend on a mortgage. A mortgage gift letter ensures that the gifted money isn’t included in your total debt, helping to keep your ratio lower.

There are also rules about who can gift a borrower down payment money; your gift letter helps underwriters confirm that you’re following those rules.

Gifted money isn’t considered taxable income, so it doesn’t increase your tax burden. That keeps more of your money free to repay your mortgage, which lenders also like to see.

Who can gift money for a mortgage down payment?

Most loan types allow gift money from family members, and some lenders also permit gifts from non-relatives. Here are the rules:

Fannie Mae-conforming conventional loans

Conventional loans through Fannie Mae allow gifts from anyone you’re related to by:

• Blood
• Marriage
• Adoption
• Legal guardianship

Upcoming marriages also count. Your fianacé(e) could gift you the money, for example, per Fannie Mae down payment gift rules.

Fannie Mae also allows down payment funds to come from grants and deferred-repayment loans.

Freddie Mac-conforming conventional loans

Freddie Mac has similar rules, allowing gift funds from what it calls “related persons.” Those include:

• Anyone related to you by blood, marriage or adoption
• A guardian of yours, or someone for whom you’re a guardian
• Your fiancée or fiancé
• Your domestic partner
• An unrelated individual with close, family-like ties to you

The gift can also come from the estate of or a trust established by a “related person.”

FHA loans

Loans backed by the Federal Housing Administration (FHA) allow gifts to come from:

• Family members
• Employers and labor unions
• A close friend with a clearly defined and documented interest in you
• Charitable organizations
• Governmental agencies or public entities that provide homeownership assistance to low- and moderate-income and first-time buyers

USDA and VA loans

The U.S. Department of Agriculture (USDA) and the U.S. Department of Veterans Affairs (VA) don’t have rules about who can give you money. Instead, both agencies’ down payment gift rules focus on who can’t contribute.

Per the USDA, anyone can give you money toward a mortgage down payment provided they aren’t a “source that has an interest in the sale of the property (seller, builder, real estate agent, etc.)”

Similarly, the VA specifies that money can come from any “donor that does not have any affiliation with the builder, developer, real estate agent or any other interested party to the transaction.”

Can you receive gifts toward your closing costs?

Yes — and the rules restricting who can contribute to your down payment don’t necessarily apply. For example, most loan types allow seller or builder concessions that can offset your closing costs.

How to use gift money for a down payment

If a relative or friend plans to give you down payment funds, you’ll need to provide a gift letter and bank statements showing the transfer.

It’s best to receive those funds at least two months prior to applying for a mortgage so that they’re properly “seasoned.” You can also use gifted funds you received within 60 days of your application, but your lender might ask for more documentation.

Down the line, once you find a home and your lender clears you to close, you’ll make your down payment — including the gifted funds — at closing. The down payment is part of your cash to close. Typically, you’ll pay this sum via cashier’s or certified check or wire transfer.

Mortgage gift letter rules by loan type

• Conventional loans: If you’re buying a single-family home as a primary residence with a Fannie Mae- or Freddie Mac-backed conventional loan, your entire down payment can be a gift from an eligible donor. If your loan is backed by Freddie Mac, you might also be able to use wedding or graduation gifts, so long as you provide a copy of your marriage license or your diploma, respectively.
• FHA loans: The FHA backs mortgages with a minimum down payment of 3.5 percent. That entire amount can be gifted.
• VA loans: Mortgages guaranteed by the VA typically require no down payment, but VA guidelines allow borrowers to put gift funds toward closing costs or a down payment, if the borrower chooses to make one. The documentation rules are similar to those of FHA and conventional loans.
• USDA loans: The USDA guarantees no-down payment mortgages to borrowers with low to moderate income in USDA-approved rural areas. Like the VA loan program, gift money can be used to pay closing costs or to make a down payment.

Mortgage gift letter rules by property type

The rules around gift amounts vary by the type of property you’re buying. For conventional loans, the following rules apply:

• Primary residence: If you’re buying a single-family residence that you’ll live in, you can make the down payment entirely with gift funds.
• Second home: If you’re putting down at least 20 percent, the gifted funds can be used to cover the entire amount. If your down payment is less than 20 percent, at least 5 percent of your down payment must be from your own money, not gifted funds.
• Investment property: You can’t use gift funds for the down payment on real estate you’re investing in or otherwise using for income.

Gift letter for mortgage template

Your lender might have a gift letter template it requires borrowers to use, so be sure to ask your loan officer before writing your own. Below is a sample for illustrative purposes only.

Gift letter for mortgage template

DATE

LENDER NAME

LENDER ADDRESS

LENDER PHONE

I/We, [GIVER], are gifting [AMOUNT OF GIFT, IN DOLLARS] to [RECIPIENT], who is my/our [NATURE OF RELATIONSHIP], in contribution to a down payment for the purchase of property at [ADDRESS OF PROPERTY].

These funds are being sourced from [ACCOUNT INSTITUTION/NUMBER], and are given freely and without any claim to the property or expectation of repayment, now or in the future.

GIVER SIGNATURE

GIVER NAME (PRINTED)

GIVER ADDRESS

GIVER PHONE

Should you gift a relative a down payment?

In this era of high rents, pricey homes and student debt burdens, it’s challenging for young people to save for a down payment. If you’re in a position to help your child or other relative buy a home, you’d be putting them on the path to building equity and wealth sooner.

Consider, though, why your child needs help buying a home. Your support might not be enough for them to become a successful homeowner if they’re buying an unaffordable home or struggle with finances.

Also, depending on the gift amount and your relationship with the recipient, there might be gift tax implications. The IRS’s annual exclusion for gifted amounts maxes out at $19,000 in 2025. As the person giving the money, you may need to file a gift tax return if you exceed that limit; the recipient won’t be taxed. Consult with a tax professional to learn what applies to your situation.

Alternatives to down payment gifts

There might be other ways you can help your child buy a home other than giving down payment funds. Consider:

• Buy the home, then have your child repay you. This option could simplify the process for your child, but it’s still complicated. This kind of transaction should only be done with the help of an attorney.
• Co-sign the mortgage application. This can boost your child’s chances of securing financing. Bear in mind that co-signing means you won’t have any ownership stake in the home, but you’ll be on the hook for the payments if your child can’t make them. If you’re retired or close to it, you might not be able to shoulder that cost.
• Become a co-borrower on the mortgage. Also referred to as a co-applicant, this status is similar to being a co-signer, but it gives you ownership to the home. However, it also gives you more paperwork and liabilities: The lender will consider your assets, credit history and income as part of the application. It will also consider you equally responsible for the debt — not just if the child falls delinquent.
• Help with the closing costs. Though not always as big as a down payment, helping with these upfront costs can ease the homebuying burden.
• Allow your child to rent a room at home at a reduced rate — or for free. If you’re fine with your child living with you and have the space, you can help boost their down payment savings by offering a room in your home, either at no cost or for below-market rent. If you choose to charge rent, establish an agreement around how long they’ll rent from you, as well as any other household expenses you’d like them to contribute to during their “lease.”

FAQ

• Is there a limit on how much down payment gift funds you can receive?
  

  Loan programs don’t typically impose limits on the amount of down payment gifts. Assuming the giver is eligible, you can receive as much as they’re willing to give.

• Do you need to report any gift funds you use for a down payment, no matter how small?
  

  Not necessarily. If you receive a gift that totals half or less of your monthly income, you likely don’t need to report it, especially if it’s been in your account for a few months by the time you apply.

• Can you use gift money for costs other than the down payment?
  

  Yes. Most loan programs allow gift money for alternative purposes like covering closing costs or buying mortgage points. It’s important to review the rules for the loan type you’re considering, though, so you don’t lose eligibility.