The Quick Read: Documenting a gift takes three pieces that tell one story: a gift letter signed by the donor, proof the money left the donor’s account, and proof it reached you or your closing agent. The amount, the donor and the dates must agree across all three. Tell your loan officer before any money moves, because a deposit that shows up without a paper trail is a common reason a gift gets questioned.
What Is the Lender Actually Verifying?
The lender is verifying two things: that the money is a true gift, and that it came from where the paperwork says it did. Everything else on this page serves those two goals.
Conventional payment estimate
The starting figures are an example price at the first-time buyer’s minimum down payment. Replace them with yours.
Editable benchmark: 7.32% as of October 22, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not a conventional loan quote.
Estimate seeded at the low end of Fannie Mae’s published range (0.58%–1.86% a year); the insurer prices the actual premium on the score and the leverage. Applies only above 80% loan-to-value.
Illustrative starting assumptions: a $350,000 price, the first-time buyer’s minimum down payment, a thirty-year term at the current Freddie Mac benchmark, mortgage insurance at the low end of Fannie Mae’s published range, and property taxes and insurance estimated at typical national rates. Every field is editable.
Illustrative estimate only — not a Loan Estimate, approval, quote, or commitment to lend. The rate field carries the weekly Freddie Mac thirty-year conventional benchmark, a market reference and not a conventional loan quote; your rate is set by the lender at lock. The mortgage insurance figure is an editable estimate seeded from Fannie Mae’s published typical range, not a premium quote; the insurer prices the actual premium, and the cancellation month assumes scheduled payments with no extra principal and no change in value. Taxes, insurance and dues are editable estimates; closing costs are not included. Conforming loan limits apply by county. Licensed in sixteen states for consumer mortgages.
A gift means no repayment is expected. That matters because a repayment obligation is a debt, and debt changes your ability to repay the mortgage. If a relative expects the money back, it is a loan. Hiding a loan behind a gift letter is a misrepresentation, and underwriters are trained to look for it.
The second goal is source verification. The lender wants to see that the donor really had the funds and that the funds really arrived. Across the wholesale conventional programs we place files with, the gift file usually stalls for one reason: the letter says one thing and the bank records say another.
Gift funds can pay for all or part of the down payment, closing costs or reserves, subject to the minimum borrower contribution rules covered below. Per the Fannie Mae Selling Guide on personal gifts, gifts are allowed on a principal residence or second home. They are not allowed on an investment property, so gift money is off the table for any home you will not live in or use as a second home.
Who Can Give the Gift?
A donor must be a relative or a person with a family-like relationship to you, and must have no stake in the sale. The acceptable list is narrower than most people expect.
| Donor type | Acceptable? | Notes |
|---|---|---|
| Spouse, child, dependent | Yes | Relative by definition |
| Blood, marriage, adoption, guardianship | Yes | Relative by definition |
| Domestic partner or fiancé(e) | Yes | Family-like relationship |
| Former relative, godparent | Yes | Family-like relationship |
| Builder, developer, real estate agent | No | Interested party |
| A friend with no family-like tie | Generally no | See the note below |
That last row trips people up. Some consumer sites say friends can give gifts. The CFPB’s archived blog post says gift money from a family member or friend can usually be used, and also tells buyers to ask each lender which gifts are allowed and what documentation is required. That is a general statement, and it is old. The conventional donor list is more specific, and Freddie Mac summaries indicate that close friends are not accepted. Ask your loan officer before you accept money from a friend.
Two newer rules widen the pool a little. An acceptable donor who is also the seller can be eligible if not affiliated with another interested party. Gift funds can also come from the estate of an acceptable donor or a trust the donor established, per Fannie Mae Announcement SEL-2023-08. Freddie Mac’s guide treats these sources too, with its own signature rules; its Section 5501.4 is the place to check wording.
Does the Borrower Have to Put In Their Own Money?
Sometimes. It depends on the occupancy, the number of units and the loan-to-value ratio.
| Situation | Own funds required? |
|---|---|
| One- to four-unit principal residence or second home, 80% LTV or less | No, all funds can be a gift |
| One-unit principal residence above 80% LTV | No, all funds can be a gift |
| Two- to four-unit principal residence or second home above 80% LTV | Yes, 5% from your own funds |
After that 5%, gifts can supplement the down payment, closing costs and reserves. These specifics are subject to lender guidelines and a full review of property, leverage and credit profile.
Here is how that fits the leverage envelope on the wholesale programs we use. A first-time buyer on a one-unit home can reach 97% LTV (3% down), and a standard purchase can reach 95% LTV (5% down). Two- to four-unit principal residences can go to 95%, and second homes to 90%. So a first-time buyer on a single-family home could, under agency rules, fund the whole 3% with gift money. A buyer on a duplex at 95% LTV needs their own 5% first. HomeReady has separate contribution rules, and income limits of 80% of area median income apply to HomeReady and Home Possible. All of it is subject to lender guidelines and full file review.
The Three-Document Package
Every gift file rests on the same three documents. Here is what each must show and where people slip.
| Document | Who provides it | Must show | Common mistake |
|---|---|---|---|
| Gift letter | Donor signs | Amount, no repayment, donor details | Missing relationship or phone |
| Donor’s proof of funds or transfer | Donor’s bank | Money left the donor | Cash withdrawn, no record |
| Borrower’s proof of receipt | Borrower’s bank or closing agent | Money arrived | Amount differs from letter |
What the gift letter says
Under the Fannie Mae guide, the letter must state the actual or maximum dollar amount of the gift. It must carry the donor’s statement that no repayment is expected. It must also give the donor’s name, address, telephone number and relationship to the borrower. The donor signs it.
Lenders commonly also ask for the property address. That is lender practice rather than part of the Fannie Mae list, but adding it costs nothing. The “actual or maximum” wording gives you some room: if the donor writes a maximum, the transfer can come in at or below it.
Does the letter need a notary? Not generally. Ask your lender, since some may add their own condition.
Wording matters on the no-repayment line. Use plain language: “This is a gift. No repayment is expected or implied.” Avoid phrases like “until I need it back” or “loan to be settled later.” Anything that suggests repayment can turn a gift into a debt in the underwriter’s eyes.
The transfer evidence
Fannie Mae accepts several forms of evidence:
- The donor’s check and your deposit slip.
- The donor’s withdrawal slip and your deposit slip.
- Evidence of an electronic transfer from the donor’s account to your account or the closing agent.
- The donor’s check to the closing agent.
- A settlement statement showing receipt of the donor’s check.
A Fannie Mae announcement from 2022 clarified that an electronic transfer record covers both the donor’s availability of funds and the transfer itself. That is why a wire or electronic transfer is often the cleanest route.
Step by Step: From Decision to Closing
Follow this order and the paperwork stays consistent.
1. Tell the loan officer first. Disclose the gift before any money moves. The lender lists it as its own asset source, separate from your account balance. Also say so if your earnest money deposit was a gift, because gift documentation then applies to that deposit too.
2. Confirm the donor is acceptable. Check the relationship and confirm the donor has no stake in the sale.
3. Check for a minimum contribution. Compare your occupancy, unit count and LTV against the contribution table in the section above.
4. Have the donor sign the letter. Fill every field. Use the actual amount if you know it.
5. Choose the transfer route. Either the funds land in your account first, or they go straight to the closing agent.
6. Collect the evidence. Gather the donor’s withdrawal or transfer record and your deposit record, or the closing-agent receipt.
7. Match the story. The amount in the transfer evidence should line up with the letter. Dates should make sense in sequence.
8. Answer underwriter questions promptly. If a condition arrives, respond with the exact document asked for.
Route A: funds go into your account
The donor withdraws or transfers the money, and you deposit it. The lender needs proof of both sides: the donor’s withdrawal or check, and your deposit. Do not let the gift sit commingled and unexplained. A deposit that shows up in your statement with no matching donor record is exactly what draws a request for an explanation.
Route B: funds go to the closing agent
The donor sends money directly to the closing agent, by check or electronic transfer. The documentation shows the donor’s funds reached the closing agent, or the settlement statement shows receipt. An older Freddie Mac extract adds that, when funds are not transferred before settlement, the donor should give the closing agent a certified, cashier’s or other official check. Treat that as a point to confirm against the live guide.
Route B often makes the file simpler because the money never sits in your account. The tradeoff is timing: the donor must have the money ready when the closing agent asks, and everyone must agree on the amount beforehand.
A note on cash
Fannie Mae’s documentation list is built around checks, withdrawals and electronic transfers. Handing a family member’s cash to the bank, or depositing loose cash, creates a record with no source. Talk to your lender before depositing any cash gift.
A Worked Example
Picture a first-time buyer purchasing a one-unit home as a principal residence at 97% LTV. The buyer’s parent wants to give the full 3% down payment. The exact terms vary by lender and program and follow a full review of property, leverage and credit.
The parent writes and signs a letter stating the amount, that no repayment is expected, their name, address, phone and relationship as parent. The buyer’s loan officer has already been told about the gift. The parent decides on Route B and sends an electronic transfer directly to the closing agent.
The file now holds three matching items: a letter with the amount, a transfer record from the parent’s account to the closing agent showing the same amount, and later a settlement statement showing the funds applied. The underwriter reads the letter, checks the transfer against it, and sees one consistent story. No questions are needed.
Now change one detail. The parent withdraws cash and the buyer deposits it into their account ahead of closing. The letter says one amount, the deposit shows a different amount, and there is no donor withdrawal record. The underwriter must ask where the money came from. That conversation takes more effort than the original paperwork would have.
If the Gift Is Already in Your Account
Don’t move it and don’t spend it. Tell your loan officer right away, because the deposit will appear on your statements. To fix the file, you generally need:
- A signed gift letter that matches the amount deposited.
- The donor’s withdrawal slip, check copy or transfer record.
- Your deposit record showing the same amount.
If those items line up, the file is usually fixable. If they do not, the lender may treat the deposit as unsourced funds. The fix is to have the donor produce the missing record, not to write a new story.
Where the General Rule Breaks
The basic process holds for most buyers, but several situations change it.
Gift of equity. When a seller who is a relative sells below market value, the price reduction is a gift of equity. The same donor and minimum contribution rules apply, per Fannie Mae’s gift of equity section. It can help with the down payment and closing costs but not Fannie Mae financial reserves. The donor is not treated as an interested party, so the gift is not subject to interested party contribution limits. The loan file keeps the signed gift letter, and on Freddie Mac loans the gift of equity must appear on the Settlement or Closing Disclosure. The contract price, appraisal and LTV need to be consistent, since the lender calculates both LTV and the contribution test from them.
Live-in donor. If an acceptable donor has lived with the borrower for the last 12 months, Fannie Mae counts the gift as the borrower’s own funds for the minimum contribution. This holds only if both people will use the home as their principal residence. Freddie Mac may require extra certification.
Trust, estate or business donors. A trust, estate or business donor needs a letter signed by the right person. For Freddie Mac, that means the trustee, the estate’s authorized representative, or a Related Person with an ownership interest in the business.
Wedding and graduation gifts. Freddie Mac has treated wedding gifts as a special category in the past, with specific deposit and documentation expectations. Current wording can vary by program and lender, so ask your loan officer before relying on a wedding or graduation gift.
Government or employer grants. These are separate asset types with their own documentation, such as award letters and terms. They are not handled like a family gift.
Multiple donors or installments. The rules are the same in principle: each donor needs a letter and a traceable transfer. More pieces mean more places for amounts and dates to drift apart, so keep a simple log of who gave what and when.
Key Terms Defined
Gift letter: A signed statement from the donor giving the amount, saying no repayment is expected, and identifying the donor and relationship.
Gift of equity: A price reduction a seller gives a buyer, usually a relative, treated as a gift toward the purchase.
Interested party: Someone with a stake in the sale, such as a builder, developer or real estate agent.
LTV (loan-to-value): The loan amount divided by the home’s value or price, shown as a percentage.
Financial reserves: Money left over after closing that shows you can keep paying the mortgage.
Closing agent: The party who handles the settlement and receives funds at closing.
What Decides the Outcome
Four things carry most files:
1. An acceptable donor.
2. A clean, traceable transfer.
3. The property type and occupancy.
4. The LTV tier.
A true gift adds no repayment obligation, so it does not change your debts. Treating a loan as a gift hides a real obligation and can change your ability to repay. A larger down payment can reduce the loan amount and may reduce mortgage insurance, which on conventional loans applies above 80% LTV. It can be cancelled at the borrower’s request at 80% of original value, and the servicer must end it automatically at 78%, subject to the Homeowners Protection Act conditions.
On the other side, a transfer that does not match the letter can stall underwriting and closing. The most useful habit is to treat the gift like a mini file of its own, with one folder holding the letter, the donor’s record and your record.
Gift tax questions belong to the donor. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit. Donors can look to the IRS as a general starting point.
Other loan types, such as FHA and VA, have their own gift rules. This article covers conventional only. For more on gift-funded purchases, see Lendmire’s guide Gift-Funded Down Payment Rules on a Conventional Loan.
If you are buying a home and want to see whether a conventional loan fits your file, Lendmire can help you compare the options and what each one asks of the file. Its conventional loan programs run through wholesale lenders, and the right starting point is a conversation before any gift money moves. All program figures here are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
Frequently Asked Questions
Can a friend give me a gift for my down payment?
Usually not on a conventional loan. The agency donor list centers on relatives and family-like relationships such as a domestic partner, fiancé(e) or godparent. Freddie Mac summaries indicate close friends are not accepted. Some consumer sources say otherwise, so confirm with your loan officer before accepting the money.
Does the gift letter need to be notarized?
Generally no. The agency guidelines do not require notarization, and the donor’s signature is what the guide calls for. A particular lender may add its own condition, so ask before the donor signs.
Can a gift cover my whole down payment?
Often yes. On a one-unit principal residence, a gift can fund the entire down payment at any LTV under Fannie Mae’s table. On a two- to four-unit principal residence or a second home above 80% LTV, you must put in 5% of your own funds first.
What if the donor wants to send the money straight to closing?
That is an accepted route. The donor’s check or electronic transfer goes to the closing agent, and the file shows the donor’s funds reached them or the settlement statement shows receipt. Agree on the exact amount in advance so it matches the letter.
Can my parents give me cash from home?
Avoid it unless your lender approves a specific method. Cash with no withdrawal record leaves nothing to trace. A check or electronic transfer from the donor’s account gives the underwriter the donor’s record and yours.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Fannie Mae Selling Guide B3-4.3-04, Personal Gifts
3. Fannie Mae Announcement SEL-2023-08
4. Freddie Mac Seller/Servicer Guide 5501.4, Other sources of funds
5. Fannie Mae Announcement SEL-2022-08
6. Fannie Mae Selling Guide B3-4.3-05, Gifts of Equity
This article is part of Lendmire’s conventional loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Smaller vs Larger Down Payment on a Conventional Loan for a Condo · How Much Down Payment a Conventional 2-4 Unit Loan Needs · How Much Down Payment a Conventional Second Home Loan Needs
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.