Receiving gifts from loved ones can make it easier to come up with the cash for a down payment and buy a home. If you want to use gifts alongside a home loan, though, you’ll need to provide your lender with a gift letter from the donor. And you’ll need to document the donor’s ownership of the money and the transfer of funds.
What Is a Gift Letter for a Mortgage?
A gift letter is a document you submit as part of a loan application if you plan to use gifted money or equity for some or all of your down payment. The gift letter allows the lender to trace donations for your down payment or closing costs and verify that you aren’t taking money from prohibited sources.
Gift letters are needed whether you’re buying a home with a conforming mortgage or a government-backed loan.
[READ: Today’s FHA Mortgage Rates]
How to Write a Gift Letter
Typically, lenders provide forms for borrowers who are using gifts, and you should use that standard document to make sure you aren’t leaving out information that your lender needs. You should expect to include the following details whether you complete a form or provide your own letter:
— The date
— Your name and the donor’s name
— The donor’s relationship to you
— The donor’s address and phone number
— The size of the gift
— The date of the gift
— How the money is being transferred if you’re receiving cash
— Whether you’re receiving equity
— The address of the home you’re buying
— A statement that the donor doesn’t expect repayment of the gift
— The donor’s signature
— Your signature
Generally, gift letters don’t need to be notarized.
Gift Letter Template for a Mortgage
Applicants who want to write their own gift letter can use this template. Simply copy and paste it into a blank document.
[Today’s Date]
To [YOUR LENDER’S NAME AND CONTACT INFORMATION]:
I/we, [GIFT-GIVER’S NAME(S)] are providing a monetary gift to [RECIPIENT’S NAME(S)], my/our [YOUR RELATIONSHIP (friend, child, grandchild, etc.)] in the amount of $[VALUE] on [DATE].
This gift is intended to be used toward the purchase of the property located at [ADDRESS]. As it is a gift, there is no expectation or requirement for repayment, monetary or otherwise, by the recipient.
The source of these gift funds is: [DESCRIPTION OF THE ACCOUNT (savings, checking account, investments, etc.) USED FOR THE FUNDS]. I/We have also included a copy of the account statement showing the transfer of the funds.
Signed,
[DONOR(S)]
[CONTACT INFORMATION FOR THE DONOR(S)]
[Read: Best Mortgage Lenders]
Why Lenders Require a Gift Letter
Lenders need to see gift letters for a few reasons.
First, regulations require lenders that finance real estate transactions to verify where the money involved comes from. These rules were tightened in the aftermath of 9/11.
“Sourcing funds became a very big deal. And so a gift letter is just a form of sourcing where the funds came from,” says Christina McCollum, producing market leader at Churchill Mortgage.
Lenders have to ensure that you aren’t using the proceeds of illegal activity to pay for your home. They also need proof that you aren’t accepting monetary gifts from someone who has a financial interest in your purchase, such as a real estate agent or loan officer who will earn a commission.
In addition, a gift letter serves to document that the gift you’re receiving is in fact a gift and not a loan. If someone in your life lent you money, that loan would need to be included in your debt-to-income ratio, and it could affect how much you’re eligible to borrow.
Finally, documenting gifts is required by government loan programs and by Fannie Mae and Freddie Mac. If lenders want to sell their mortgages to investors, they must adhere to the documentation standards set by those programs.
How Much Money Needs to Be Documented With a Gift Letter?
Ideally, gifts of any size should be disclosed to your lender and documented with gift letters if you’re going to use the funds to buy your new home.
“Even if you get gifts, let’s say of $500, for your earnest money, we still do a gift letter and go through the gift process,” McCollum says.
If you didn’t bring a gift to your lender’s attention and underwriters notice a large deposit in your account within the past 60 days (two months of bank statements), you’ll be asked to explain the source of the funds and get a gift letter.
Typically, unexplained deposits that are at least half the size of your gross monthly income will be investigated by your lender if you’re getting a conforming loan or an FHA loan. For USDA loans, any deposit over $1,000 may need to be sourced.
[See: Current VA Mortgage Rates]
Other Documentation for Down Payment Gifts
The lender must verify that sufficient funds to cover the gift are either in the donor’s account or have been transferred to your account. If you’re receiving a gift through a deposit into your bank account, your lender needs to see a bank statement from the donor showing the money leaving their account plus a recent bank statement or record of account activity showing the money entering your account. Alternatively, you can provide a copy of the donor’s check and your corresponding deposit slip. Other acceptable forms of documentation include:
— A copy of the donor’s withdrawal slip and your deposit slip
— Evidence of the electronic transfer of funds from the donor’s account to your account
— A copy of the donor’s check to the closing agent
It’s important that the date when the money is transferred matches the date the donor provides on the gift letter.
“If you submitted a gift letter where you had today’s date on there that it’s going to be deposited, but then you received it two months ago, it’s going to raise a red flag for the underwriter,” says Alex MacLagan, senior mortgage advisor at MacLagan Home Loans.
Keep in mind that if the donor’s bank statement lists any unusually large deposits immediately before the donor transfers the money to you, that may concern underwriters.
“They had no money before that. All of a sudden they got $10,000, now they’re giving you a gift. That’s going to create a ripple effect of questions,” MacLagan says. The donor may then have to prove that the $10,000 didn’t come from a prohibited source.
Another way to transfer a gift is for the donor to wire the funds to the escrow or title company. In that case, you just need to show proof that the money was received.
MacLagan finds that donors often prefer this method, especially if they’re hesitant to share bank statements.
“It tends to be the path of least resistance because it’s less paperwork, and then you don’t have to deal with any pushbacks from the gift donor,” MacLagan says.
Mortgage Down Payment Gift Rules
Gift rules vary by loan program, and you may be required to make a minimum contribution from your own funds. For primary residences, the following guidelines apply.
Conforming Loans
If you’re buying a one-unit property, you can use gift funds to cover the down payment, closing costs and cash reserves.
If you get a Fannie Mae loan and you’re buying a two- to four-unit property with a down payment of less than 20%, you need to pay at least 5% from your own funds and can use gifts to cover the remainder. Freddie Mac Home Possible does not have a minimum borrower contribution for a site-built single-family residence. The program requires a 3% minimum contribution from your own money to finance two- to four-unit properties and a 5% minimum contribution for manufactured homes.
You can accept gifts from people with close relationships to you, including:
— Your spouse, child or dependent
— Anyone else who’s related to you by blood, marriage, adoption or legal guardianship
— A domestic partner or their relative
— Someone you’re engaged to marry
— A former relative
— A godparent
Freddie Mac allows you to use graduation gifts or wedding gifts from unrelated donors, though you’ll need to document the event with a diploma or transcript or a marriage license or certificate.
You can accept gifts from sellers, as long as they are eligible to give you a gift because of their relationship to you. But the donor can’t be affiliated with the real estate agent, builder or developer, or anyone else with a financial interest in the purchase.
FHA Loans
The minimum 3.5% down payment on an FHA loan can’t be covered by a gift from the seller or anyone who has a financial interest in the transaction. Gifts from other sources can be used to cover the down payment and closing costs but cannot count toward cash reserves.
Cash gifts may come from the following people or entities:
— A family member
— Your employer or labor union
— A close friend whose connection to you can be documented
— A charity
— A homebuyer assistance program through a government agency or public organization
Only family members may give gifts of equity. This can happen when you buy a home from a family member and get a credit toward your down payment.
VA Loans
Most VA mortgages don’t require a down payment. But if you are going to be released from active duty within 12 months and you don’t yet have an offer of civilian employment, you might have to make a 10% down payment and show proof of six months of cash reserves. If you’re buying a multi-unit property and planning to rent out some of the units, you may need six months of cash reserves.
You’re allowed to use gifts to make a down payment with your VA loan. You can also use gifted funds to pay the VA funding fee or other fees and closing costs. However, you can’t fulfill the reserve requirement with gift funds. And you can’t accept gifts from someone with a financial stake in the transaction, like the real estate agent, builder or developer.
USDA Loans
USDA home loans don’t generally require a down payment, but if you make one, you’re allowed to use gift funds. You can’t accept cash gifts from the seller or anyone with an interest in the transaction. You can use gifts to cover closing costs but not to satisfy a reserve requirement.
Gifts of equity are allowed, but you can’t take out cash corresponding to the gift at closing. Meaning you can’t accept a down payment gift, say, 3% of the purchase price, and then take a 100% loan and get the 3% back when you close.
Rules for Other Property Types
Gift rules are different when you buy a second home or an investment property. If you’re buying a second home and make at least a 20% down payment, Fannie Mae allows you to use an unlimited amount of gift funds, just like with a primary residence. If you’re putting down less money, you need to make at least a 5% contribution from your own funds before you can use gifts.
Freddie Mac doesn’t allow gift funds to be used when qualifying a borrower for a second home.
And if you’re buying an investment property, you cannot use gift funds.
[When Will Mortgage Rates Go Down? See the 2025-26 Forecast]
What Are the Tax Implications of a Gift Letter?
Gifts aren’t taxable if they’re less than the annual exclusion for the year. In 2025, a donor can give up to $19,000 per recipient without being required to report the gift to the IRS. Thus, your parent can give $19,000 to you and the same amount to your spouse, or $38,000 in total, without needing to file a gift tax return.
Gifts larger than the annual exclusion must be reported and count toward the donor’s lifetime gift and estate tax exemption. As of 2025, that exemption is $13.99 million, after which gifts may be taxed at a rate of up to 40%. For 2026, that number will increase to $15 million. So even if a gift for a mortgage is above the annual exclusion, the donor typically won’t owe taxes on it unless they are making very significant transfers in their life or leaving a large estate to their heirs.
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Gift Letters for Your Mortgage originally appeared on usnews.com
Update 11/18/25: This story was previously published at an earlier date and has been updated with new information.
