Gift Funds
Gift funds are money given to a homebuyer by a family member, employer, or organization to help cover a down payment or closing costs. Most loan programs allow gift funds from eligible donors, but the gift must be documented with a gift letter stating no repayment is required. Loans disguised as gifts will disqualify you from financing.
Conventional loan programs (Fannie Mae/Freddie Mac) allow 100% of the down payment to come from gift funds if you're putting at least 20% down. For down payments below 20%, you may need to contribute a minimum percentage of your own funds depending on the program. FHA loans allow the entire 3.5% down payment to be gifted.
Eligible donors vary by program. Conventional loans allow gifts from family members (broadly defined), fiancés, and domestic partners. FHA extends this to close friends and charitable organizations. VA loans allow gifts from anyone. Employers can also provide gift funds in some programs.
The gift letter must state: the donor's name and relationship to the buyer, the dollar amount, the property address, that the funds are a gift not a loan, and that no repayment is required. Lenders will also verify the funds have been deposited into your account (via bank statements). Large deposits unexplained by gift documentation will be questioned.
Key Takeaway
Gift funds are money given to a homebuyer by a family member, employer, or organization to help cover a down payment or closing costs. Most loan programs allow gift funds from eligible donors, but the gift must be documented with a gift letter stating no repayment is required. Loans disguised as gifts will disqualify you from financing.
Related Terms
Frequently Asked Questions
Generally, family members (parents, siblings, grandparents), fiancés, and domestic partners. FHA also allows close friends and nonprofits. The exact rules vary by loan program.
Yes. The funds must be deposited and documented in your bank account before or at closing. Provide a gift letter and bank statements showing the deposit.
No. A gift that's actually a loan can constitute mortgage fraud. The gift letter must clearly state no repayment is expected or required.
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