Gift Money for Down Payment

Apr 11, 2023


If you are planning to buy a house and need some extra cash for the down payment, you may be wondering if you can use money gifts from family and friends. The answer is yes, but there are some rules and requirements you need to follow.

Here are some tips on how to use gift money for your down payment:


You need to document the source and amount of the gift money.

You will need to provide a gift letter from the donor that states their name, relationship to you, address, phone number, and the amount and purpose of the gift. The letter should also state that the gift is not a loan and does not need to be repaid.


You need to verify that the gift money is in your bank account.

You will need to provide bank statements that show the deposit of the gift money and the balance of your account. You may also need to provide a paper trail of the gift money, such as a check or a wire transfer receipt.


You need to follow the lender's guidelines on how much gift money you can use.

Different lenders have different rules on how much of your down payment can come from gift money. Some may allow you to use 100% of your down payment from gift money, while others may limit it to a certain percentage or dollar amount. You should check with your lender before accepting any gift money.


You need to consider the tax implications of using gift money.

Depending on the amount and source of the gift money, you or the donor may have to pay taxes on it. The IRS has an annual gift tax exclusion that allows you to give or receive up to $15,000 per person per year without paying taxes. Anything above that amount may be subject to taxes. You should consult with a tax professional before using gift money for your down payment.


Using gift money for your down payment can be a great way to boost your home buying power and reduce your mortgage costs. However, you need to be careful and follow the rules and regulations to avoid any problems or delays with your loan approval. If you have any questions or concerns about using gift money for your down payment, don't hesitate to contact one of our experienced mortgage advisors for a free consultation.