Saving for a down payment can be one of the biggest challenges when buying a home.
Some buyers receive financial assistance from family members or other eligible donors. In certain mortgage programs, this money may be used toward a down payment, closing costs or other permitted expenses.
However, mortgage lenders need to understand where the funds came from and whether they are genuinely a gift rather than an undisclosed loan.
The short answer: yes, certain mortgage programs allow eligible gift funds to be used for a down payment, but the lender will require documentation proving the money is a true gift. Tell your loan officer early. A licensed loan officer can help you compare mortgage loan options and explain what each program requires.
What are mortgage gift funds?
Gift funds are money given to an eligible borrower without an expectation of repayment.
Depending on the mortgage program, the funds may come from an eligible relative or another permitted donor. For example, a parent may provide money to help an adult child purchase their first home.
The rules depend on the loan program and lender requirements.
Can gift money pay for a down payment?
Yes, certain mortgage programs allow eligible gift funds to be used for a down payment.
Under applicable Fannie Mae conventional loan guidelines, personal gifts may be used for eligible primary residence and second-home transactions, subject to program requirements. However, gift funds are not permitted for Fannie Mae investment-property transactions.
Other loan programs may have different donor and contribution requirements. Learn more about your choices on our first-time home buyer page.
What documents may be required?
Your lender may request:
Gift letter
A signed statement identifying the donor, borrower, gift amount, relationship and confirmation that the money does not need to be repaid.
Proof of funds
Documentation showing the donor has the funds available.
Transfer documentation
Evidence showing how the gift money moved from the donor to the borrower or closing agent.
Bank statements
Statements may be required to establish the source and receipt of the funds.
The exact documentation depends on the loan program.
Common mistakes to avoid
Avoid these mistakes when using gift money:
- Depositing large amounts of unexplained cash.
- Describing a loan as a gift.
- Moving funds without keeping transfer records.
- Waiting until the closing date to inform your lender.
- Assuming every donor and loan program has the same rules.
Tell your mortgage professional about the gift as early as possible.
Can a family member pay your down payment directly?
In certain situations, funds may be transferred to the borrower or directly to an authorized closing agent.
The lender will explain the acceptable transfer method and documentation for the specific program. Do not transfer money before checking the loan requirements.
Frequently asked questions
Can my parents give me money for a mortgage down payment?
They may be eligible donors under certain mortgage programs. The applicable rules must be checked.
Does gifted money need to be repaid?
A qualifying gift is not expected to be repaid. An amount that must be repaid is not a genuine gift.
Can I use gift funds for closing costs?
Some mortgage programs allow eligible gifts for certain closing expenses.
Does FHA allow gift funds?
FHA has its own gift-fund requirements, including donor and documentation rules. Confirm the current rules with your loan officer.
Let Vesta Lending help you explore your options
Every mortgage scenario is different. Contact Vesta Lending to discuss your homebuying goals and learn what documentation may be required for your mortgage application. When you are ready, get a free quote or get pre-approved with Alex.
You can also call Alex Al-Ammar at (313) 992-9898 or email Alex@vestalending.com.
This article is for general information only. It is not legal, tax or financial advice. Loan programs, guidelines and eligibility depend on your credit, income, property and lender requirements. Gift-fund rules vary by program and lender. Speak with a qualified professional about your individual situation.
Official references: Fannie Mae Selling Guide — Personal Gifts · Consumer Financial Protection Bureau — Where can I get money for a down payment?
