Anyone can gift you money for a down payment, but your lender will verify the source and require a written gift letter
A gift for a down payment can come from a family member, friend, employer, nonprofit organization, or government program—but your lender has to approve it. Most lenders require a gift letter signed by the person or organization giving you the money. The letter must state that the funds are a gift, not a loan, and that no repayment is expected. Without this letter, your lender may treat the deposit as a loan you have to repay, which changes your debt-to-income ratio and can kill your mortgage approval.
The person giving the gift does not have to be related to you, though lenders are more cautious about gifts from people outside your immediate family. If your gift comes from someone you are not related to, your lender will likely ask for proof of the relationship and documentation showing where the money came from. This is part of anti-money-laundering rules that all lenders follow.
Key Takeaways
- Your lender requires a signed gift letter stating the money is a gift, not a loan, and that no repayment is expected.
- Gifts can come from family, friends, employers, nonprofits, or government down payment assistance programs, but the source must be documented.
- The person giving the gift cannot receive repayment in any form—not even a promise to repay later or a share of the home's equity.
- Your lender will ask for bank statements or other proof showing where the gift money came from and that it has been in the giver's account long enough to be considered their own funds.
- Some lenders require the gift to come from a specific relationship (spouse, parent, sibling, grandparent) or will charge a higher interest rate if it comes from someone else.
Family members and what lenders expect from them
Parents, grandparents, and siblings are the most common gift sources, and lenders treat these gifts with the least scrutiny. Your lender will still require a gift letter, but they usually do not ask for proof that the giver can afford to give the money. The letter should include the giver's name, address, phone number, and relationship to you, plus the exact dollar amount and the date the money will be transferred.
Some lenders have stricter rules: they may require the gift to come only from a spouse, parent, or grandparent, or they may allow gifts from other family members but charge a higher interest rate. Ask your lender about their specific policy before you accept a gift from an aunt, uncle, or cousin. If your lender will not accept the gift, you may be able to shop for a different lender—not all lenders have the same restrictions.
Friends, employers, and non-family sources
Gifts from friends, employers, or other non-family sources are possible but require more documentation. Your lender will ask for proof that the person giving the gift actually has the money and that it is not borrowed from someone else. This usually means bank statements showing the funds in their account for at least two months before the gift is given. Your lender wants to see that the money is genuinely theirs, not a short-term loan they took out to help you.
An employer can give you a gift as part of a relocation package or retention bonus, but the lender will treat it the same way: they will ask for documentation that the money is yours to keep, not something you have to repay or earn back through future work. If your employer gives you the money as a bonus, get a letter from your employer stating the amount and confirming it is a gift with no repayment obligation.
Government and nonprofit down payment assistance programs
Many state and local governments, as well as nonprofits, run down payment assistance programs that give money directly to homebuyers or pay the lender on their behalf. These are treated as gifts by mortgage lenders, and most lenders accept them without hesitation because the programs are established and documented. Examples include state housing finance agencies, community development organizations, and programs run by cities or counties.
When you receive assistance from a government or nonprofit program, the program itself usually provides the documentation your lender needs. You will receive a commitment letter or award letter stating the amount of assistance and confirming it is a gift. Bring this letter to your lender along with any other paperwork the program gives you. Your lender may contact the program directly to verify the funds, which is normal and does not delay your approval.
What the gift letter must say and how to get one
A gift letter is a simple document, but it has to include specific information or your lender will reject it. The letter must state the dollar amount of the gift, the date the money will be transferred, and a clear statement that the funds are a gift and not a loan. It must also say that the giver does not expect repayment in any form—not now, not later, and not as a share of the home's equity or future sale proceeds.
The letter must be signed and dated by the person giving the gift. Some lenders have a template you can use; ask your lender for theirs. If your lender does not provide one, you can write a simple letter yourself or use a template from a real estate website, but have the giver sign it in front of a notary public. A notarized signature is not always required, but it strengthens the letter if your lender questions it.
The giver should keep a copy of the signed letter and send the original to your lender before the money is transferred. Your lender will file it with your loan application. Do not transfer the money until your lender has received and approved the gift letter—moving money before the letter is in place can raise red flags about where the funds came from.
Proof of funds and bank statement requirements
Your lender will ask the person giving the gift to provide bank statements showing the funds are in their account. Most lenders want to see statements from the past two to three months. The statements should show the account balance and the giver's name on the account. If the gift is large, your lender may ask for statements going back further to make sure the money was not borrowed recently.
After the gift is transferred to your account, your lender will ask you for bank statements showing the deposit. This is standard procedure and does not mean your lender suspects fraud—they are simply documenting the money trail for their records and for compliance with federal lending rules. Keep all statements and correspondence related to the gift until your loan closes.
What disqualifies a gift or makes it risky
A gift becomes a problem if the giver expects repayment in any form. If you promise to pay back part of the money later, or if you agree to give the giver a share of the home's equity, the lender may treat it as a loan instead of a gift. This can disqualify you because it increases your debt-to-income ratio. Never make a verbal agreement to repay a gift—if the giver needs the money back, it should be structured as a loan from the start, with a promissory note and a clear repayment schedule.
A gift also becomes risky if the money comes from an unknown or undocumented source. If the giver cannot explain where the money came from, or if the funds appear in their account suddenly without a clear source, your lender may refuse the gift. This is part of federal anti-money-laundering rules, and lenders are required to ask questions when the source of funds is unclear.
Some lenders will not accept gifts if the giver does not have a documented relationship to you or if the giver is in a country with sanctions or restrictions. These rules vary by lender, so ask your lender about their specific policies before you accept a gift from someone outside your immediate family.
How the gift affects your mortgage approval and interest rate
A documented gift does not hurt your approval chances—in fact, it can help because it reduces the amount you have to borrow. However, some lenders charge a slightly higher interest rate if the gift comes from someone outside your immediate family. This is not universal; many lenders do not adjust rates based on gift source. Shop around and ask multiple lenders about their policies before you commit to a gift.
The gift also does not affect your debt-to-income ratio, which is one of the main things lenders look at when deciding whether to approve you. Because the gift is not a loan, it does not count as debt. This is why the gift letter is so important—without it, your lender may treat the deposit as a loan and count it against you.
Frequently Asked Questions
Can the person giving me a gift ask me to pay them back later?
No. If repayment is expected in any form—whether now or later—it is a loan, not a gift, and your lender will not accept it as a down payment gift. The gift letter must state clearly that no repayment is expected. If someone wants to help you but also needs the money back, structure it as a separate loan with a promissory note and a repayment schedule.
What if the gift comes from someone I am not related to?
Your lender will ask for more documentation: bank statements showing the funds are in the giver's account, proof of your relationship to them, and possibly a longer gift letter explaining the relationship. Some lenders accept gifts from non-family members without penalty; others charge a higher rate or refuse them. Ask your lender before you accept the gift.
Do I have to report the gift to the IRS?
The person giving you the gift may have to file a gift tax form if the amount exceeds the annual gift tax exclusion, which varies by year. However, you do not report the gift as income on your tax return. The giver should consult a tax professional about their reporting obligations; this is separate from your mortgage lender's requirements.
Can I use a gift to cover closing costs instead of the down payment?
Yes. Most lenders allow gifts to be used for closing costs, and some programs allow gifts to cover both. The gift letter should specify what the money will be used for. Ask your lender whether the gift can be split between down payment and closing costs or whether it has to go toward one or the other.
What happens if my lender rejects the gift letter?
Ask your lender why they rejected it and what information is missing. Usually it is because the letter does not include all required details or is not signed. Have the giver revise and re-sign the letter, or ask your lender for their template. If your lender has a policy against gifts from your source, you may need to find a different lender or use a different source for the down payment.