Using Gift Money for a Down Payment

What is gift money?

Gifted funds for a mortgage are exactly what they sound like: money given to you to help you buy a home. Typically, gifted funds come from family members or friends who want to help a homebuyer secure a property and are willing to chip in some cash to make that happen.

The NAR’s 2025 Home Buyers and Sellers Generational Trends Report noted that 8% of all buyers used gift money for a down payment, and 33% of younger millennials received down payment help in the form of a gift. That's more than any other generation. Using a gift is especially common among younger buyers, with 27% of homebuyers ages 26 to 34 using gifted funds, compared with just 13% of buyers ages 35 to 44 and 6% of buyers ages 45 to 59.

That said, the amount of gifted funds for a mortgage can vary, as can down payments for a home in general. Data from the NAR shows that the median down payment amount in 2025 was 15%, although that also varies by age, with younger buyers putting down less. Homebuyers ages 26 to 34 made a median down payment of 10%, homebuyers ages 35 to 44 made a median down payment of 14% and homebuyers ages 45 to 59 made a median down payment of 17%.

» MORE: How much should you put down on a house?

Rules for gift money for a mortgage

There are rules that dictate how much gift money a homebuyer can use for a down payment, although these rules differ depending on the type of mortgage taken out.

However, one consistent rule for all forms of mortgages is that the gift cannot come from someone who has a vested interest in the property’s sale, such as its real estate agent or builder.

Requirements to use gift money

When it comes to receiving and using gift money, it’s important to understand that the rules can vary widely depending on the type of mortgage. You’ll need to show proof of your gift money from the donor, which may include a gift letter or documentation of bank statements. Let's look deeper into the ways to disclose your gift money for a mortgage.

How to show proof of gift money

Some items required to prove the origin of gift money can include:

• Proof of transfer of funds from the donor’s account to the homebuyer’s account
• Proof of transfer of funds from the donor’s account to the settlement or closing agent overseeing the home purchase
• Proof of transfer of funds from the donor’s account to the earnest money deposit holder (if the gift funds are being used for an earnest deposit)

Another way to show proof of gift money is through a gift letter. For example, Freddie Mac requires that borrowers who receive gifted funds for conventional mortgages supply this kind of letter that explains to the lender where the gift money originated.

What to include in a gift letter

Your lenders and your loan type will dictate the exact information that needs to be included in a gift letter, but in general, you’ll want to include the following:

• The total dollar amount of the gift
• Confirmation from the donor that repayment is not required
• The donor’s personal information, as well as their relationship to the person receiving the gift
• Signatures of the donor and the person receiving the gift

Talk with your lender to confirm that they do not require any additional information in a gift letter. Learn more about gift letters and see an example template.

When not to disclose gift money

Note that gift money that has been in your bank account for more than a few months may not need to be disclosed as gifted funds. That’s because, generally, the funds are considered already yours or “seasoned money” at that point. And since most mortgage lenders will only want to see a few months’ bank statements, gifted funds deposited well before that don't face as much scrutiny.

Why lenders verify gift money

Why do mortgage lenders care so much about gift money and where it comes from? For the most part, they need to verify that you can afford to make the monthly mortgage payments for the home you want to buy with your own funds. They also need to verify that the funds are a true gift and not a loan, as most mortgage lenders do not allow loans to be used for the down payment on a home.

Tax implications for gift money

While it sounds counterintuitive, taxes on gifts are typically paid by the donor, not the recipient. This is to prevent people from avoiding federal estate taxes by giving away all their money before death.

According to real estate investor Dawson Skorczewski of Sioux Empire Home Buyers, there are annual and lifetime gift tax exclusions that determine whether the donor needs to pay gift taxes on amounts they contribute to a homebuyer’s down payment. However, tax rules are often complicated, so it's “advisable for the donor to consult a tax professional to understand the potential implications,” he said.

The annual exclusion amount for gift taxes is $19,000 for 2025. This means a family member can contribute up to $19,000 toward a homebuyer’s down payment without incurring any gift taxes, or that a couple can contribute up to $38,000 to a single homebuyer without triggering tax liability. And even if a gift exceeds the annual limit, it still might not be subject to any gift tax if the donor hasn’t exceeded their lifetime limit.

» MORE: Tax deductions for homeowners

FAQ

Bottom line

Potential homebuyers can use gift funds for a mortgage down payment if they have a qualifying donor who wants to help them get into a property. Even better, there aren’t many rules that govern the amount of gift funds a homebuyer can receive, although there may be tax implications for the donor.