Gift Money for Down Payment Rules 2025: Complete Guide + Free Letter Template
✅ YES, you can use gift money for your entire down payment!
73% of first-time buyers receive financial help from family. Gift money is 100% legal and accepted by all major loan programs—but you MUST follow specific rules or your loan will be denied.
Quick Answer: Can You Use Gift Money?
✅ YES! Here's What You Need to Know:
• All major loan programs accept gift money: FHA, Conventional, VA, USDA
• You can use gifts for 100% of your down payment (with some loan types)
• Gifts must come from family members or approved sources (not friends, usually)
• You MUST have a signed gift letter stating the money is a gift, not a loan
• You need to document the transfer (bank statements showing deposit)
• No gift tax for gifts under $18,000 per person (2025 IRS limit)
Who Can Give You Gift Money?
✅ ALLOWED Gift Sources:
1. Family Members (Most Common)
Parents, grandparents, siblings, spouse, fiancé(e), aunts, uncles, nieces, nephews
2. Employers
Down payment assistance programs, relocation assistance (must be documented)
3. Charitable Organizations
Nonprofits with IRS 501(c)(3) status, government agencies, religious organizations
❌ NOT ALLOWED Gift Sources:
🚫 The Seller or Real Estate Agent
Sellers cannot give you money for the down payment. This is considered a "seller concession" and has different rules.
🚫 Friends (for FHA/VA/USDA loans)
FHA, VA, and USDA loans do NOT allow gift funds from friends—only family members.
Gift Money Rules by Loan Type
🏠 FHA Loans (Most Flexible)
Gift Funds Allowed:
100% of down payment + closing costs
Who Can Give: Family members, employer, charitable organizations, government agencies
Your Required Contribution: ZERO. You can use 100% gift funds for the entire 3.5% down payment.
🏦 Conventional Loans
Gift Funds Allowed:
• Less than 20% down: 100% can be gift funds
• 20%+ down: 100% can be gift funds
• ✅ Friends allowed if 20%+ down payment
🎖️ VA Loans (Veterans)
Gift Funds Allowed:
100% of closing costs
(VA loans require $0 down, but gifts can cover closing costs and funding fee)
💰 Ready to Use Gift Funds for Your Down Payment?
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Compare Gift-Friendly Lenders →Gift Letter Template (Free Download)
🚨 REQUIRED: You MUST Have a Signed Gift Letter
Without a properly signed gift letter, your lender will treat the money as a LOAN, which increases your debt-to-income ratio and could get your mortgage denied.
📄 Free Gift Letter Template:
GIFT LETTER
Date: [Insert Date]
I/We, [Donor Name(s)], hereby certify that I/we have made a gift of $[Amount] to [Borrower Name(s)], my/our [Relationship], to be applied toward the purchase of the property located at [Property Address].
I/We certify that:
- • No repayment of this gift is expected or implied.
- • This is a bona fide gift and not a loan.
- • The source of these funds is [Source: savings account, etc.].
_________________________________
Donor Signature Date
_________________________________
Borrower Signature Date
IRS Gift Tax Rules 2025
✅ GOOD NEWS: Most Gift Money Is Tax-Free
The IRS allows each person to gift up to $18,000 per year (2025) to another person without any tax consequences. Married couples can gift $36,000 combined.
How to Gift More Than $18,000 Tax-Free:
Strategy 1: Split Between Parents
Example: You need $50,000 for down payment
- • Mom gifts $18,000 (tax-free)
- • Dad gifts $18,000 (tax-free)
- • Grandma gifts $14,000 (tax-free)
- • Total: $50,000 with ZERO taxes
Strategy 2: Gift to Both Spouses
Example: Parents want to gift $72,000
- • Mom gifts $18,000 to you + $18,000 to spouse = $36,000
- • Dad gifts $18,000 to you + $18,000 to spouse = $36,000
- • Total: $72,000 with ZERO taxes
FAQ
Can I use 100% gift money for my down payment?
Yes! FHA, VA, USDA, and conventional loans all allow 100% of your down payment to come from gift funds. You don't need to contribute any of your own money.
Do I have to pay taxes on gift money?
No. As the recipient, you NEVER pay taxes on gift money. The donor may need to file IRS Form 709 if the gift exceeds $18,000, but they likely won't owe any taxes due to the $13.61 million lifetime exemption.
Can a friend give me gift money?
It depends: Conventional loans: Yes, if you're putting down 20%+. FHA, VA, USDA: No, friends are NOT allowed (family only).
How long does gift money need to be in my account?
Ideally 60+ days (called "seasoning"). If less than 60 days, you'll need full documentation (gift letter + donor's bank statements + transfer proof).
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