# Gift funds for a down payment: who can give and how to document it

Source: https://nobullshitloans.com/buy/gift-funds/
By Tyler Rood, Loan Officer, NMLS ID # 2064776, Edge Home Finance, LLC (NMLS ID # 891464). Updated 2026-11-09.

## The short answer

Family can give gift money for a down payment on most loans; FHA also allows an employer, charity, government homebuyer program or close friend with a documented interest in you. You need a gift letter (signed by the donor, and you on FHA) stating the amount, relationship and that nothing has to be repaid, plus a paper trail from the donor's account to yours or to closing. A gift you'll repay is a debt you must disclose. Tell me before any money moves, so the paper trail is right the first time.

Family help is the first place I look when a buyer comes up short, before any assistance program, and nine times out of ten I would take it over assistance. It is also where people get nervous: who is allowed to give, what the paperwork says, whether somebody owes tax. Here is how gift funds for a down payment work on each loan program, what the gift letter says, the paper trail, gifts of equity on family sales, and the one line you never cross.

## Who can give you gift funds for a down payment?

Each program keeps its own donor list. These are the program rules as of November 2026:

| Program | Who can give | Who cannot |
|---|---|---|
| Conventional (Fannie Mae) | A relative by blood, marriage, adoption or legal guardianship; a domestic partner, fiance or fiancee; a former relative; someone with a long-standing, family-like relationship with you | Anyone tied to the builder, the developer, the real estate agent or another party with an interest in the sale |
| FHA | A family member; your employer or labor union; a charitable organization; a government agency with a homeownership program; a close friend with a clearly defined and documented interest in you | Any donor giving from cash kept at home rather than in an account. For your 3.5% minimum, also the seller or anyone who benefits financially from the sale |
| USDA | Gifts are allowed, but USDA's documentation rules do not name specific donors, so ask me which donors your lender accepts | Anyone with an interest in the sale, and any donor giving from cash kept at home |
| VA | Family, according to VA's own buyer's guide. VA's full donor rules sit in its lender handbook, so I confirm your donor on your file | Anyone involved in the sale, according to VA's own buyer's guide |

Conventional loans can also follow Freddie Mac's guide, and its rules can differ from Fannie Mae's, so the underwriting findings on your file settle it. On a VA loan with full entitlement there is no down payment to cover, so gifts usually go toward closing costs.

## Can a friend give me money for a down payment?

Sometimes. On FHA, a close friend can give if the relationship is clearly defined and documented. On a Fannie Mae conventional loan, someone outside the family can give if the two of you have a long-standing, family-like relationship. Either way, the letter describes the real relationship, and the underwriter decides whether it fits.

If your friend does not fit the donor rules for your program, the answer is a different source of money, not different wording. Calling a friend a cousin, or a loan a gift, is a false statement on your loan application. Mortgage fraud is real.

## What the gift letter for a down payment has to say

I send you the right letter for your loan once we know the program. Whatever the form looks like, it carries the same facts:


**What the gift letter has to say**

- The donor's name, address and phone number.
- The donor's relationship to you.
- The dollar amount. Fannie Mae accepts the actual amount or a maximum.
- A statement that no repayment is expected or required.
- The donor's signature. On FHA, the letter is signed and dated by both the donor and you.
- On a Fannie Mae loan, if the money comes from a trust or an estate, the letter names that account.


I don't hand out a blank template, because each program's letter has to match its own rules, and a letter is only as good as the paper trail behind it.

## The paper trail: how a gift gets documented

The letter says the money is a gift. The paper trail proves it moved. The lender has to see where the money started and where it landed, so plan on both ends:

1. **Tell me before any money moves.** I'd rather set it up right the first time than untangle it later.
2. **The donor's side.** A statement or transaction history showing the money leaving the donor's account. It has to be the donor's own, traceable money: a bank account, a retirement account or a stock sale, not cash kept at home.
3. **The transfer.** A check with your deposit slip, a record of an electronic transfer, or a wire or cashier's check sent straight to the closing attorney or title company.
4. **Your side.** If the gift lands in your account, the statement or transaction history showing it arrive. Print it to PDF with the web address showing and every page included. Never a screenshot.
5. **The signed gift letter.**


A large gift can go straight to the settlement agent instead of through your account, and that is often the cleanest route. If it already landed in your account, that works too: the file just needs the letter, the donor's proof of the withdrawal and your account history. The gift can arrive before you are under contract or at closing. What causes trouble is money that shows up with no explanation, so the order is always tell me, document it, then move it. How lenders treat any large deposit is covered on my list of [what not to do before closing](https://nobullshitloans.com/buy/what-not-to-do-before-closing/).


**Where a gift has to show up** The lender has to see where the money started and where it landed, with a signed letter beside it.

1. Donor's account: Their statement shows it leaving, never cash kept at home
2. The transfer (then): Check and deposit slip, transfer record, wire or cashier's check
3. Where it lands (then): Your statement shows it arriving, or it goes straight to the settlement agent
4. Gift letter (plus): Signed by the donor, and by you on FHA


## How much money can parents give for a house?

The question is usually not a dollar limit. It is what the gift can pay for, and how much of your own money has to be in the deal first:

- **One-unit home you will live in, Fannie Mae loan:** no money of your own is required. The whole down payment and closing costs can be a gift.
- **Two to four unit home or a second home, Fannie Mae loan, less than 20% down:** 5% has to come from your own funds first. After that, gifts can cover the rest, including reserves.
- **FHA:** the 3.5% minimum can come from a gift.
- **USDA:** a gift can go toward your cash to close, but it cannot count as reserves.
- **A donor who lives with you:** on a Fannie Mae loan, a gift from someone who has lived with you for the past 12 months counts as your own money if you will both live in the new home.

When family wants to help, I size the gift backward from the payment you can carry: total cash to close, minus the money you are putting in, is the gift. Then I send the family written versions that differ only by gift size, each with its loan amount, payment and cash to close, and I round up. I'd rather tell you more and then it be less.

**Worked example: Sizing a family gift: $400,000 home, 5% down**
- Total cash to close (my 9% planning number): $36,000
- minus Your own savings going in: $12,000
- equals: Gift that closes the deal: $24,000
Note: Ask what the family can really give, not a token amount. On a Fannie Mae loan, extra gift money can count as your reserves; on USDA it cannot.
_Hypothetical. Your real figure comes from your Loan Estimate, and my planning rule is on the [cash to close](https://nobullshitloans.com/buy/cash-to-close/) page._


If a parent would rather help with income than with cash, that is a different tool, a non-occupant co-borrower, and it is covered on my page about [co-borrowers and co-signers](https://nobullshitloans.com/buy/co-borrowers-and-co-signers/).

## Is gift money for a down payment taxable?

That is a question for the person giving it and their CPA, and I'm not a CPA. What I can tell you is the lender's side: the lender is not looking at the tax. It is looking at whether the money is truly a gift and whether it can be traced. If your parents are giving a large amount, have them ask their CPA before the money moves.

## Gift of equity: when a family member sells you the house

A gift of equity is not cash. It is the seller, usually a parent or grandparent, giving you part of their equity in the home as a credit at closing, which can count toward your down payment.

- **Fannie Mae:** allowed on a home you will live in or a second home. It can cover all or part of the down payment and closing costs, prepaids included, but not reserves. The file needs a signed gift letter and a settlement statement that lists the gift of equity.
- **FHA:** only family members can give equity, and only on a home sold to another family member.
- **USDA:** the gift of equity is applied as a cut in the purchase price. There is no cash back, and it cannot count as reserves or as funds to close.
- **VA:** the rules sit in VA's lender handbook, and I check them on your file. Ask me before you plan on one.

**Worked example: Gift of equity: a parent sells a $300,000 home to their child**
- Purchase price: $300,000
- minus Gift of equity from the seller: $30,000
- equals: Loan amount (90% of the price): $270,000
Note: The $30,000 covers a 10% down payment without any cash changing hands for it.
_Hypothetical conventional purchase of a home the buyer will live in. Closing costs still apply, and on a Fannie Mae loan the gift of equity can cover those too._


## A gift is never repaid

A gift comes with no expectation of repayment, ever. If you tell me you are paying your parents back, I have to report it as a debt, because it is one. A repaid gift is a loan with a gift letter stapled to it.

That does not always sink the deal. In my files, borrowed money can work when it is disclosed and secured by something you own, and its payment counts in your debt-to-income ratio like any other loan. What never works is calling it a gift. The same goes for the relationship: the letter states who the donor really is to you. A gift letter is a signed statement, and so is your loan application.

**My take**
Ask family first, and ask early. The money talk with parents, grandparents or siblings should happen before you go house hunting, not the week before closing. Most people who can help find it rewarding, and a gift adds no payment. Assistance programs often cost something somewhere, which I cover on my page about [Virginia first-time buyer programs](https://nobullshitloans.com/virginia/first-time-buyer-programs/).


If someone in your family wants to help, start with two numbers: what your cash to close will be, and what you can put in yourself. The gap is the conversation to have, and the paperwork above is how it gets done cleanly. For everything else your down payment can come from, see my page on [how much down payment you need](https://nobullshitloans.com/buy/down-payment/).

## Frequently asked questions

### Can gift money cover my closing costs too?

On the programs I use most, yes. On a Fannie Mae loan, a gift can pay the down payment, the closing costs and even your reserves once any required contribution of your own money is in. USDA lets gift money go toward the cash you need to close, but not toward reserves.

### Should the gift go to me or straight to the closing attorney?

Either works. Sending it straight to the closing attorney or title company by wire or cashier's check is often the cleanest, because the money never mixes with your own. If it lands in your account first, that is fine too, as long as you keep the statements that show it leaving the donor and arriving with you.

### Can I use gift money for a down payment on an investment property?

Not on a Fannie Mae conventional loan, where gifts are allowed for homes you live in and second homes, not rentals. FHA, VA and USDA loans are for homes you will live in, so the question does not come up there. For a rental, plan on your own money or a loan secured by something you own.

### Can FHA gift funds cover my whole down payment?

Yes. FHA's 3.5% minimum can come from an acceptable donor, such as a family member or a close friend with a documented interest in you. The donor cannot give from cash kept at home, and the letter has to be signed and dated by both of you.

## Sources

- [Fannie Mae Selling Guide B3-4.3-04, personal gifts](https://selling-guide.fanniemae.com/sel/b3-4.3-04/personal-gifts)
- [Fannie Mae Selling Guide B3-4.3-05, gifts of equity](https://selling-guide.fanniemae.com/sel/b3-4.3-05/gifts-equity)
- [HUD Handbook 4000.1 (Update 18), gifts and the minimum required investment](https://www.hud.gov/sites/default/files/Housing/documents/40001-hsgh-Update-18.pdf)
- [USDA HB-1-3555 Chapter 9, Attachment 9-A, gift funds](https://www.rd.usda.gov/files/3555-1chapter09.pdf)
- [VA Home Loan Guaranty Buyer's Guide (April 2022)](https://www.benefits.va.gov/homeloans/documents/docs/VA_Buyers_Guide.pdf)

## Disclosures

Individual Originator: Tyler Rood, Loan Officer, NMLS ID # 2064776 (www.nmlsconsumeraccess.org). Licensed in NC, PA, TX and VA.
Edge Home Finance, LLC | NMLS ID # 891464 | www.nmlsconsumeraccess.org. Licensed in all U.S. states & D.C., EXCEPT New York. Edge Home Finance, LLC is a mortgage broker, not a direct lender or creditor. Virginia Broker License MC-7006. North Carolina Mortgage Broker License B-201539. Pennsylvania Mortgage Broker License 81041. Texas: Mortgage Company License, Department of Savings and Mortgage Lending.
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