Can Someone Gift You a Down Payment for a House?

It is generally possible for someone to provide a financial gift to assist with a down payment when purchasing a home. Many homebuyers, particularly first-time buyers, often rely on support from family or friends. While widely accepted, specific procedures and rules must be followed to ensure funds are properly recognized by mortgage lenders. Adhering to these guidelines helps ensure a smoother home-buying process.

Understanding Gifted Down Payments

A gifted down payment refers to funds provided to a homebuyer by an eligible donor with no expectation of repayment. This is fundamental, as lenders must confirm the money is a genuine gift and not a disguised loan that would add to the borrower’s debt. Lenders scrutinize the absence of a repayment requirement throughout the mortgage application process.

The permissible sources for gifted funds vary depending on the type of mortgage loan. For conventional loans, acceptable donors typically include relatives such as a spouse, child, dependent, or any individual related by blood, marriage, adoption, or legal guardianship. Some conventional loan programs may also allow gifts from non-relatives who share a familial relationship, like a domestic partner, fiancé, former relative, or godparent. Individuals with a vested interest in the transaction, such as the builder, developer, real estate agent, or seller, are generally prohibited from providing gift funds.

For Federal Housing Administration (FHA) loans, the range of acceptable donors can be broader, including relatives, employers, labor unions, close friends, charitable organizations, or government agencies offering homeownership assistance. Similarly, Veterans Affairs (VA) loans permit gifts from almost anyone not an interested party in the transaction. Regardless of the loan type, funds must originate from legitimate sources and should not be borrowed by the donor.

Lenders also consider the “seasoning” of funds, referring to how long money has been held in a bank account. Ideally, gifted funds should be deposited into the recipient’s account at least 60 days before applying for a mortgage. Funds not seasoned can still be used but require additional documentation to verify their origin and ensure they are not a hidden loan. Large deposits appearing suddenly without a clear history will require thorough explanation and documentation.

Navigating the Lender’s Requirements

When utilizing gifted funds for a down payment, mortgage lenders require specific documentation to verify the nature and source. A central piece is the gift letter, which confirms the funds are a genuine gift and not a loan.

The gift letter must contain several key pieces of information:
The donor’s full name, address, and their relationship to the borrower.
The exact dollar amount of the gift and the date transferred.
The source of the gifted funds, such as the donor’s bank and account type.
A definitive statement from the donor confirming no repayment is expected or implied.
The property address, if known.
Both the donor and recipient must sign the gift letter; notarization is typically not required.

Beyond the gift letter, lenders require a clear paper trail to trace the movement of funds. This generally involves providing bank statements from both the donor and recipient. Lenders typically ask for the recipient’s bank statements for the past two months to demonstrate the funds are available. In some instances, one to three months of statements may be required.

Lenders scrutinize these statements to ensure funds are legitimate and to track the exact amount, which must match the figure stated in the gift letter. Any large deposits on the recipient’s bank statements not clearly identified as the gift will require further explanation.

If gifted funds are wired directly at closing, particularly for conventional loans, the need for donor bank statements might be reduced, though FHA loans may still require one month of the donor’s statement. The lender’s verification process often includes contacting the donor directly to confirm authenticity and ensure no expectation of repayment.

Tax Implications for Gifted Funds

When a down payment for a home is gifted, understanding potential tax implications is important, primarily for the donor. For the recipient, there is generally no income tax liability, as gifts are not considered taxable income.

The tax considerations largely fall on the donor, who may be subject to federal gift tax regulations. The Internal Revenue Service (IRS) establishes an annual gift tax exclusion, which for 2025, allows an individual to gift up to $19,000 to any one person without triggering reporting requirements. If a married couple jointly gives a gift, they can combine their exclusions, allowing for a total of $38,000 per recipient in 2025 without requiring a gift tax return.

Should a gift exceed this annual exclusion amount, the donor is typically required to file IRS Form 709, the United States Gift (and Generation-Skipping Transfer) Tax Return. This form must generally be filed by April 15th of the year following the calendar year in which the gift was made. Filing Form 709 does not automatically mean gift tax is owed; it serves to report the gift and track it against the donor’s lifetime gift tax exemption.

For 2025, the lifetime gift tax exemption is $13.99 million per individual. A donor typically will not owe any gift tax unless their cumulative taxable gifts over their lifetime exceed this substantial amount. Married couples have a combined lifetime exemption of $27.98 million for 2025. The responsibility for any potential gift tax liability rests solely with the donor, not the recipient.