What parents can gift toward a down payment has no legal limit, but lenders do
Your parents can gift you any amount of money they own outright. There is no federal cap on how much a parent can give a child for a down payment. However, the lender financing your home sets rules about what gifts they will accept, and those rules vary by loan type and lender.
Most lenders require you to document where the money came from. They want proof it is a gift, not a loan you will have to repay. If the lender thinks you are hiding debt, they may deny your mortgage or demand you repay the gift before closing. The documentation requirement exists because lenders calculate how much you can borrow based on your income and existing debts — a hidden loan would change that math.
The size of the gift does not trigger a tax bill for you or your parents under current federal law, though gifts above a certain threshold require your parents to file a form with the IRS. That form does not create a tax liability; it is a reporting requirement only.
Key Takeaways
- Your parents can gift any amount they own, but your lender will require a signed gift letter stating the money does not need to be repaid.
- Most conventional loans allow gifts to cover the entire down payment, but some lenders cap gifts at a percentage of the purchase price or require you to contribute your own funds.
- FHA loans allow 100 percent of the down payment to come from a gift, but the gift must come from a family member and you must sign a statement confirming this.
- Your parents must document the source of the gift funds — typically by providing bank statements showing the money left their account — to prove the funds are not borrowed.
- Gifts above $18,000 per parent per year require your parents to file Form 709 with the IRS, but this is a reporting requirement and does not create a tax bill.
What lenders require in a gift letter
Your lender will ask your parents to sign a gift letter — a document stating that the money is a gift, not a loan, and that no repayment is expected. The letter must include the amount, the relationship between your parents and you, and a statement that the funds are a gift with no strings attached.
Different lenders use different templates, but most require the same core information: the donor's name and address, the recipient's name, the amount, the date, and the property address. Some lenders ask your parents to confirm they have the funds available and that they are not borrowing the money themselves.
Your parents do not need to hire a lawyer to write this letter. Your lender will provide a template or accept a simple signed statement. The letter must be signed and dated before closing, and your lender will keep a copy in the loan file.
How much of the down payment can be a gift under different loan types
Conventional loans (those not backed by a government agency) typically allow gifts to cover the entire down payment. However, some lenders require you to contribute at least 5 to 10 percent of your own funds, depending on the loan program and your credit profile. Ask your lender whether they allow 100 percent gift funding or require you to put in some of your own money.
FHA loans allow 100 percent of the down payment to come from a gift. The gift must come from a family member — a parent, grandparent, sibling, or spouse. The lender will require you to sign a statement confirming the relationship and that the money is a gift. FHA does not allow gifts from employers, friends, or charitable organizations to cover the down payment.
VA loans (for military members and veterans) allow gifts to cover the entire down payment with no minimum contribution required from you. The gift can come from a family member, employer, or charitable organization. VA does not require a specific relationship between donor and borrower.
USDA loans (for rural properties) allow gifts to cover the entire down payment. The gift can come from a family member or a nonprofit organization. Like FHA, USDA requires a gift letter and confirmation that no repayment is expected.
Documenting where the gift money came from
Your lender will ask for bank statements showing that your parents have the funds and that the money left their account. Typically, they want to see statements from the last two months covering the account where the gift originated. The statements must show the account holder's name, the account number (last four digits), and the balance.
If your parents transfer the money to you before closing, your lender will also want to see your bank statements showing the deposit. They may ask for a statement covering 60 days or more to trace the money from your parents' account to yours and then to the closing. This is called a paper trail, and it proves the funds are legitimate and not borrowed.
If the money sits in your account for more than a few days before closing, your lender may ask where it came from. If you cannot explain a deposit, the lender may require a written explanation or additional documentation. To avoid delays, ask your lender how long the money should sit in your account before closing and whether they need any additional paperwork.
Tax reporting for gifts over the annual threshold
Federal law allows each person to give up to $18,000 per year (in 2024) to another person without filing a gift tax return. This amount changes yearly. If your parents give you more than $18,000 in a single calendar year, they must file Form 709 (United States Gift Tax Return) with the IRS.
Filing Form 709 does not mean your parents owe taxes on the gift. It is a reporting requirement only. The form tracks lifetime gifts against a federal lifetime exemption, which is much higher than the annual threshold. For most people, filing the form is the only consequence — no tax bill results.
If both your parents give you money, each parent has a separate $18,000 annual threshold. So if your mother gives you $18,000 and your father gives you $18,000 in the same year, neither is required to file Form 709. If your mother gives you $25,000, she must file Form 709 for the $7,000 over the threshold.
Your lender does not care about the gift tax threshold and will not ask about it. This is between your parents and the IRS. However, your parents should be aware of the reporting requirement so they can file the form if needed.
What happens if the lender thinks the gift is actually a loan
If your lender suspects the gift is actually a loan you will repay, they may deny your mortgage or ask you to repay the gift before closing. This can happen if the gift letter is vague, if the money came from a source that looks like a loan (such as a credit card advance), or if there are other signs of hidden debt.
To avoid this, make sure the gift letter is clear and specific. It should state that the money is a gift, that no repayment is expected, and that the donor is not expecting anything in return. Have your parents sign and date the letter, and provide it to your lender as soon as possible.
If your lender asks questions about the gift, answer them directly and provide any additional documentation they request. Do not delay — lenders often set closing deadlines, and missing paperwork can push your closing date back.
Gifts from sources other than parents
Grandparents, aunts, uncles, and siblings can also give you money for a down payment. The rules are the same: the lender will require a gift letter, proof of funds, and a paper trail showing the money came from the donor's account. Some loan types restrict who can give a gift — for example, FHA requires the donor to be a family member, while VA and USDA are more flexible.
Employers, friends, and charitable organizations can give gifts for VA and USDA loans but not for FHA loans. Conventional loans vary by lender, so ask your lender whether they accept gifts from non-family sources.
Frequently Asked Questions
Do my parents have to give me the money all at once?
No. Your parents can give you money over time, and you can accumulate it in your account before closing. However, your lender will want to see where the money came from, so keep records of each deposit. If the money sits in your account for a long time, your lender may ask for an explanation of the source.
What if my parents want to give me money but do not have it in their bank account right now?
Your parents must have the funds available in their own account before giving them to you. If they are borrowing the money to give to you, that is a problem — the lender will see it as a loan you will eventually have to repay. Your parents should only gift money they own outright.
Can my parents give me a down payment gift if they co-sign the mortgage?
Yes. If your parents co-sign the mortgage, they can still give you a gift for the down payment. The gift letter and documentation requirements are the same. However, if your parents co-sign, they are legally responsible for the loan if you do not pay, so lenders often scrutinize co-signed loans more closely.
Will receiving a gift affect my credit score?
No. A gift does not appear on your credit report and does not affect your credit score. Your credit score is based on your borrowing and payment history, not on money you receive as a gift.
What if I receive a gift but do not use it for the down payment?
If you receive a gift and do not use it for the down payment, you do not need to tell your lender. However, if you told your lender the money was for the down payment and then used it for something else, that could be a problem. Be honest with your lender about how you plan to use the gift.