Helping someone you care about buy a home can be as rewarding as purchasing your own house.
The good news is that today’s mortgage guidelines make it easier than ever to use gift funds—money you don’t expect to be repaid—to cover some or even all of a buyer’s down payment and closing costs.
In this article, you’ll learn what counts as gift money, which loan programs allow it, and how to keep a simple paper trail for yourself and the buyer who’s applying for a mortgage.
Ready to dive in? Read on or skip ahead to download our Gift Fund Playbook.
What Exactly Is a Down Payment Gift?
A down payment gift is a financial contribution that the buyer never has to pay back. Lenders will ask for a short, signed gift letter confirming two things:
- You're giving the money free and clear—no strings attached.
- You have the funds available to transfer.
Gifts can come from relatives by blood, marriage, adoption, or legal guardianship—as well as from fiancés, fiancées and domestic partners. Acceptable donors can also vary based on the loan type, so make sure to consult with your Loan Officer for more information.
Under federal lending rules, that money must be documented as a true gift (not a loan in disguise) and must not place an undisclosed repayment burden on the buyer. In other words, the gift can't come from a party with a financial interest in the sale.
Quick tip: Cash deposits raise red flags. Wire transfers or cashier’s checks create the cleanest audit trail.
Why Gift Funds Matter in 2025
- Down payment savings. Many buyers have the monthly cash flow to take on a mortgage payment, but not the savings in the bank for a lump-sum down payment.
- Rate buydown opportunities. If structured properly, applying gift cash to points can carve a full percentage point off your mortgage rate.
- Mortgage insurance. You could help the buyer shrink or eliminate mortgage insurance by pushing the down payment to 20%.
In summary, gift funds can close the affordability gap without forcing homebuyers to drain their savings.
Which Loan Programs Allow Gift Funds—and How Much?
Loan programs that accept gift funds include Conventional, FHA, VA and USDA loans. Remember that everyone's situation is unique, and the documentation needed for gift funds may vary by loan program. As such, it's important to consult with your Loan Officer on specific loan program documentation requirements for your gift fund scenario.
Keep in mind: Most lenders want the money in the buyer's account or sent directly to escrow no later than 60 days prior to closing.
5 Simple Steps to Use Gift Funds
- Talk to the lender and buyer's real estate agent early. Confirm program limits and documentation needs.
- Sign the gift letter. The buyer’s lender will provide a template for the buyer and donor to fill in blanks (you can find a template in our Gift Fund Playbook below), determine the gift amount, and add signatures.
- Transfer the funds. Wire or cashier's check is best.
- Save your receipts. Provide proof of withdrawal and deposit.
- Relax. The lender handles the rest during underwriting.
🚪 Ready to Help Someone Unlock Their New Front Door?
Download our playbook below for a printable gift‑letter template, pro tips and more—then browse move‑in‑ready homes that qualify for gift‑fund financing!