Quick answer: Many mortgage programs allow gift funds from an eligible donor to help with a down payment, closing costs, or required reserves. The acceptable donor, documentation, and minimum borrower contribution depend on the loan program, occupancy, property type, and transaction.
Who can provide gift funds?
For many primary-residence loans, an eligible donor may include a relative, domestic partner, fiancé, or another person with an acceptable family-type relationship. Some programs also permit gifts from employers, charitable organizations, government agencies, or approved assistance programs. A seller, real estate agent, builder, or other financially interested party generally cannot disguise a sales concession as a personal gift.
What documentation is usually required?
- A signed gift letter stating the amount and that repayment is not expected
- Evidence that the donor had the funds available
- Documentation showing the transfer to the borrower or closing agent
- Confirmation that the donor meets the program’s eligibility rules
Large deposits without a clear paper trail can delay underwriting. Before moving money, ask the lender exactly how the transfer should occur. A wire sent directly to the closing agent may require different documentation than money deposited into the borrower’s account.
Is a borrower contribution still required?
Sometimes. Requirements can change with the loan type, occupancy, number of units, down payment, and source of the gift. Even when the entire required investment can come from a gift, the borrower should still plan for inspections, moving costs, repairs, and emergency reserves.
Review how much down payment may be required and the first-time home buyer guide.
Gift-fund rules vary by program and lender. Confirm the donor and transfer process before funds move.