Using Gift Money for Your Down Payment: Rules You Must Follow

A family member wants to help with your down payment. That's great. But lenders have strict rules about gift money, and messing them up can kill your loan approval days before closing.

Who Can Give You a Gift

Lenders only accept gifts from specific people: your spouse, parent, grandparent, sibling, child, or legal guardian. Some lenders also allow gifts from domestic partners, aunts, uncles, or cousins — but confirm first.

Gifts from friends, coworkers, or distant relatives are usually a no-go.

The Gift Letter: Your Most Important Document

Every gifted dollar requires a signed gift letter stating:

• The donor's name, address, and phone number
• Their relationship to you
• The exact dollar amount
• A statement that repayment is not expected
• The donor's signature and date

Your lender will provide the template. Both you and the donor must sign it.

Documentation Requirements

The donor must also provide: a copy of their ID, a bank statement showing they have the funds, and proof the funds were transferred to you. Lenders will verify the paper trail from their account to yours.

Large deposits from unexplained sources are a red flag. Don't accept cash gifts. Don't let the donor deposit money into your account and call it a loan. Lenders scrutinize bank statements for exactly these situations.

Seasoning Rules Matter

Gift funds need to be in your account before underwriting reviews your file. If the gift arrives last minute, expect delays. Seasoning — how long the money sits in your account — typically isn required for gifts, but the transfer must be complete and documented.

Bottom line: get your gift letter signed early, keep the paper trail clean, and never lie about where the money came from.