What Is A Down Payment Gift?

According to the National Association of REALTORS, roughly 25% of first-time home buyers receive cash gifts to help with their down payment.

Cash gifts to buy a home are allowed, and can come from a variety of sources:

  • Parents
  • Grandparents
  • Fiancé / Fiancée
  • Friends
  • Employers

Mortgage lenders allow cash gifts in all sizes - from a few hundred dollars to a few hundred thousand dollars. All gifts require documentation.

To document a cash gift for down payment, you must show proof of the gift money leaving your gifter’s bank account and entering into your own. This can be accomplished with receipts from the withdrawal and receipts from the deposit.

It can also be proved with wire transfer receipts.

Second, your cash gift for down payment must be accompanied by a letter that lists the name and address of everyone involved, and states that the gift is actually a gift and requires no repayment.

This language is necessary because a cash gift for down payment that requires you to pay it back isn't a gift at all - it's a loan that your lender must account for.

Lastly, when you're getting a cash gift to buy a home, plan ahead. If you can receive the gift at least a month before your closing, it gives your lender extra time to do its due diligence.

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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