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Facts About Down Payment Gifts

Lenders have many rules and regulations when buying a home with down payment assistance. If you are considering giving or receiving any down payment assistance, here’s a breakdown of standard rules and requirements.

What Are Down Payment Gifts?

A down payment gift is money a buyer receives from someone else to use toward a down payment or closing costs during a home purchase. Down payment gifts do not need to be paid back.

Gift Rules

Each type of loan has different restrictions about how those gifts can be used, and how the gift should be documented, and who can provide financial gifts.

What Are Gift Letters

Most lenders require a gift letter that documents the details about how much is being given, who is gifting the money, and what their relationship is to the buyer. This letter also states that money does not need to be repaid and must be signed by the donor. Verification of sufficient funds and documentation of fund transfer is also often required.

Gift Types

Conventional Loan Gift Rules

Conventional loans rules often allow buyers to use gift money for down payments, closing costs, or financial reserves. Down payment gifts on conventional loans cannot be used for investment properties. Restrictions state that only romantic partners and family members can gift this money.

FHA Loan Gift Rules

Federal Housing Administration (FHA) loans allow buyers to use gift money to pay closing costs, mortgage expenses, or down payments. In addition to a gift letter, you must provide evidence of both withdrawal from the source account and evidence of the deposit to the receiving account. Friends, family, employers, and other entities can gift this money.

USDA Loan Gift Rules

United States Department of Agriculture (USDA) loans offer unique benefits to buyers in rural areas by requiring zero money down on the purchase of a property. As a result, gift funds aren’t often used toward a down payment. These funds can be used to pay for some or all of the loan’s closing costs. However, this money cannot be used as financial reserves to help you make mortgage payments. Gifts for a USDA loan can come only from family members, employers, a labor union, a charitable organization, or a homeowners assistance program.

VA Loan Gift Rules

Like USDA loans, you are not required to make a down payment when applying for a Veteran’s Affairs (VA) loan. Funds can be used for a down payment or to cover closing costs. This money can also be used to pay the funding fee often required with this type of loan. Almost any person can gift this money.


If you are considering using a financial gift to purchase a home, speak with a lender about their gift rules before applying. This information was verified by one of my favorite lenders, Greg Giokas, Senior Loan Officer, Guild Mortgage, NMLS#1760. Contact Greg.

I hope this information is useful to you or someone you know. Please feel free to pass it on. Ask me your real estate questions anytime. I’m here for you. Contact Janet.

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