How To Document Your Cash Gift For Down Payment

Nearly 25% of first-time home buyers down payment gifts to help buy a home, according to the National Association of REALTORS®.

Mortgage lenders are fine about this.

Lenders make no restriction on how small or big a cash gift for down payment can be. However, they will verify where the money came from to make sure the gift is “legal” and not an act of fraud.

So, when you’re receiving a cash gift for help with buying a home, it's important to follow a process to meet your lender's requirements.

1. Have a proper mortgage gift letter

When you’re receiving a cash gift for down payment, write a formal gift letter, signed by all parties, that includes the following information:

  • The gift giver’s name, address, and contact information
  • The gift recipient’s name and relationship to the donor
  • The dollar amount and approximate date of the gift

Include language that specifically says the cash gift is a gift - not a loan. The difference between gifts and loans is that gifts don’t require repayment. Loans do.

All parties must sign the down payment gift letter for it to be valid. Electronic signatures are acceptable.

2. Keep a documentation trail for the gift

Retain records that match the money changing hands with the gift letter that's been signed by all parties.

You'll want to provide the following:

  1. A copy of the withdrawal receipt from the gift giver’s bank
  2. A copy of the deposit slip or bank record from the gift receiver's bank

Physical and digital formats are acceptable, so use whichever is easier.

3. Deposit the gift into your account, by itself

Deposit your cash gift into your account, non-commingled with other monies. The figures in your documentation trail must match the figures in your gift letter exactly. Commingling a deposit makes that impossible, and may negate your ability to use the money at all.

Ask us your cash gift question in the chat. We're here to help.

Dan Green

Dan Green

Dan Green is a former mortgage loan officer and an industry expert. He's appeared on NPR and CNBC, and in The Wall Street Journal, Bloomberg, and dozens of local newspapers. Dan has helped millions of first-time home buyers get educated on mortgages, real estate, and personal finance. Have mortgage questions? Ask Dan in the chat.

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