Mortgage Gift Money Rules 2026: Parents Help Down Payment Guide
YES! Parents CAN gift down payment money! Requirements: (1) Gift letter (states money is gift, no repayment expected), (2) Paper trail (bank statements showing transfer from parent to you), (3) Donor relationship (family member). Loan types: FHA allows 100% gift, VA allows 100% gift, Conventional requires 5% your own funds if <20% down. Gift tax: No tax if under $18K per person ($36K from both parents = $0 tax). Process: Parent writes check → you deposit → provide gift letter + bank statements to lender. Get pre-approved with gift funds. Related: Down payment guide.
💝 Gift Money Quick Facts:
FHA: 100% of down payment can be gift (even 3.5% minimum)
VA: 100% gift allowed (veterans)
Conventional: 5% your funds if <20% down, rest can be gift
Gift Tax: $18K/person tax-free ($36K from both parents)
⏰ Gift letter + paper trail = lender approved!
Gift Money Rules by Loan Type (2026)
| Loan Type | Gift Allowed | Your Funds Required | Donor Allowed |
|---|---|---|---|
| FHA | 100% of down payment | $0 (all gift OK) | Family, employer, charity |
| VA | 100% of down payment | $0 (all gift OK) | Family, employer, charity |
| Conventional (<20% down) | Partial gift allowed | 5% your own funds | Family only |
| Conventional (≥20% down) | 100% of down payment | $0 (all gift OK) | Family only |
| USDA | 100% of down payment | $0 (all gift OK) | Family, employer, charity |
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Gift Letter Requirements (Template Included)
What Must Be in Gift Letter:
- Donor name & address: Who is giving the gift
- Recipient name: You (the home buyer)
- Gift amount: Exact dollar amount ($30,000)
- Property address: Home you're buying
- Relationship: Parent, sibling, grandparent, etc.
- No repayment statement: "This is a gift, no repayment expected"
- Donor signature & date: Must be signed
📄 Gift Letter Template 2026:
Step-by-Step: How to Use Gift Money
Step 1: Parent Writes Gift Letter
Action: Use template above. Fill in all fields. Parent signs & dates. Make 2 copies (one for lender, one for records).
Step 2: Parent Transfers Money to You
Best method: Check or wire transfer (clear paper trail). Avoid: Cash (can't document).
Timeline: Transfer 60+ days before closing = easier. Transfer <60 days = need extra documentation.
Step 3: Deposit in YOUR Account
Action: Deposit gift check in YOUR bank account (checking/savings). Keep deposit receipt. Wait for funds to clear.
Step 4: Provide Documentation to Lender
Required docs:
- Signed gift letter
- Parent's bank statement (showing withdrawal)
- Your bank statement (showing deposit)
- Canceled check or wire confirmation
Step 5: Lender Verifies & Approves
Process: Lender reviews paper trail. Confirms gift letter signed. Verifies funds seasoned (in your account 60+ days OR clear source). Approves for closing!
Gift Tax Rules 2026
IRS Gift Tax Exclusion:
2026 Limit: $18,000 per person, per year (tax-free). Amounts over $18K require gift tax return (Form 709) but usually NO tax owed (lifetime exemption $13.61M).
Examples:
$15K from Mom: $0 tax, no form needed ✅
$30K from Mom: $12K over limit, file Form 709, but $0 tax (lifetime exemption) ✅
$18K from Mom + $18K from Dad: $36K total, $0 tax, no form needed ✅
$50K from both parents: $25K each = $7K over per person, file Form 709, but $0 tax ✅
💡 Pro Tip:
Split large gifts across years: $40K gift? Give $18K in January 2026 + $22K in January 2026 = $0 tax, no form needed!
Common Gift Money Mistakes (Avoid These!)
❌ Mistake #1: Cash Gift (No Paper Trail)
Problem: Parent gives $20K cash. Can't document source. Lender rejects.
Solution: Use check or wire transfer. Always create paper trail!
❌ Mistake #2: No Gift Letter
Problem: Parent transfers money but no gift letter. Lender thinks it's loan (counts in DTI).
Solution: Always get signed gift letter BEFORE transfer!
❌ Mistake #3: Gift from Non-Family (Conventional)
Problem: Friend gives $10K for down payment. Conventional loan = NOT allowed.
Solution: Use FHA/VA (allows non-family gifts) OR have family member give gift!
❌ Mistake #4: Large Deposit Without Explanation
Problem: $30K appears in account. No explanation. Lender thinks it's undisclosed loan.
Solution: Provide gift letter + parent's bank statement showing withdrawal!
Gift Money FAQs (2026)
Q: Can I use gift money for closing costs too?
A: YES! Gift money can cover down payment + closing costs. Same rules apply (gift letter + paper trail).
Q: Can my grandparents give me gift money?
A: YES! Grandparents, parents, siblings, aunts/uncles all qualify as family donors. Same gift letter requirements.
Q: What if I already deposited the gift 3 months ago?
A: GOOD! Funds "seasoned" (in account 60+ days) = easier approval. Still need gift letter + bank statements showing transfer.
Q: Do I pay taxes on gift money?
A: NO! Recipient NEVER pays tax on gifts. Donor may need to file Form 709 if over $18K, but usually $0 tax owed (lifetime exemption).