How to Use Gift Funds for a Down Payment

Accepting help from family? Here’s how to document it the right way.

If you’re considering using gift funds for a down payment, it’s important to know the right way to document them. A quick conversation with one of our Thompson Kane loan officers early in your home search can help you avoid delays and keep your loan on track.

What Counts as Gift Funds?

Gift funds are money given to you by a relative, fiancé, or in some cases a close friend, with no expectation of repayment. Eligible donors and documentation can vary by program and state, so our lending team will confirm what applies to your situation.

Using Gift Funds for Down Payment: Documentation Checklist

To show the funds are a true gift and not a loan, lenders typically ask for:

• A signed gift letter stating the amount, the donor’s name and relationship, and that no repayment is expected.
• Evidence of the transfer (for example, a bank statement or wire confirmation) that clearly shows the paper trail.
• When requested, proof the donor has the ability to provide the funds.

Your Thompson Kane loan officer will provide the correct letter template and step-by-step instructions so everything matches underwriting requirements.

Loan Program Requirements

Rules differ by loan program. Here’s what you need to know:

• Conventional (Fannie Mae/Freddie Mac): Gifts are allowed. For primary, single-unit purchases, gifts can cover the full down payment and costs. However, multi-unit properties and second homes require that at least 5% of the purchase price come from the borrower’s own funds. Gifts generally can’t be used for investment property down payments.
• FHA: Gift funds may cover the entire down payment and eligible closing costs when donors meet FHA rules. Eligible donors include family members, employers, labor unions, government agencies, and certain nonprofits.
• VA: No down payment is typically required for eligible borrowers. Gifts are allowed for closing costs and prepaid items.
• USDA: No down payment is required for eligible rural properties. Gifts can help with closing costs, subject to program rules.

Because these details can change, your loan officer will confirm the exact requirements for your property type and location.

Timing: When to Move the Money

Coordinate the transfer with your lender’s timeline. We’ll tell you when to move the funds, what documentation to keep, and how to avoid last-minute issues with large deposits that can’t be easily documented and sourced.

Common Pitfalls to Avoid

• Depositing cash without a clear paper trail.
• Mixing gift funds with unrelated large deposits.
• Having the donor expect repayment, even informally.
• Transferring funds before you receive instructions from your lender.

When in doubt, ask us first. A short call with a Thompson Kane loan officer can save days during underwriting.

Why Work With Thompson Kane

We simplify the process for both you and your donor. We’ll prepare the right letter, coach everyone on documentation, and coordinate timing with your purchase. That means fewer surprises and a smoother path to closing.

Bottom line: Family help can make homeownership more achievable. If you’re planning to use gift funds, connect with our lending team for personalized guidance and a confident start.

Information is for educational purposes only and not a commitment to lend. Program availability and requirements vary by state and loan type. All loans subject to credit approval and property eligibility.