Purchase · 6 min read
Can I use gift funds for a down payment?
July 7, 2026 · Updated October 5, 2026 · Written by Bill Egan, NMLS 7342
Short answer
Yes. A gift can cover earnest money, the down payment, or closing costs on most purchase loans, and it does not have to come from a parent. A spouse, a brother or sister, a grandparent, and other close family can give the money too. Who else is allowed depends on whether the loan is conventional or FHA. We still have to show the money left their account and landed in yours. A loan dressed up as a gift is not a gift.
01
Why this comes up
Someone in your family offered the down payment. It might be a parent, but it might be a sister, a grandparent, or an aunt. The wire is about to go out, and you are afraid a gift will stall the loan or get treated like a loan you have to pay back. You also heard that only a parent can give the money. That is not the rule.
02
Where this goes wrong
The wire lands as a large deposit with no trail, and underwriting stops the file until someone can show where it came from. Or the person who sent it is not allowed on that program. A builder, a developer, or a real estate agent cannot hand you the down payment. Closing then waits on a paper trail that should have existed before the money moved.
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What we do about it
We match the person giving the money to the program before anyone sends it.
Fannie Mae — Selling Guide B3-4.3-04
- Your spouse, your child, or anyone related to you by blood, marriage, adoption, or legal guardianship
- A domestic partner, or a relative of that partner
- A fiancé or fiancée
- A former relative
- Someone with a long family-like relationship
Freddie Mac — Guide Section 5501.4
- Your spouse, child, or dependent
- Anyone related to you by blood, marriage, or adoption
- A guardian, or a person you are the guardian for
- A fiancé or fiancée
- A domestic partner
- An unrelated person with close family-like ties
- A business, trust, or estate of one of those people
FHA — Handbook 4000.1
- A parent, stepparent, or grandparent
- A child, brother, or sister
- A spouse or domestic partner
- An uncle, an aunt, or an in-law
- Your employer or labor union
- A close friend with a documented interest in you
- A charity, or a government homebuyer program
The donor still cannot be the builder, the developer, or the real estate agent.
In many files, the simplest way to avoid the paperwork is to have the donor send the money straight to the title company the day before closing, or the day of closing. It does not have to land in your checking account first. That skips the deposit on your statement and the matching transfer papers, which is where these files get stressful and confusing. You still sign a gift letter. The title company’s receipt at closing is the transfer proof.
04
How to get ready
Do not send cash in an envelope. Tell us who is giving the money before anyone hits send. A parent, a sibling, and a grandparent are allowed on these programs, and other people can be too. In many cases, have the donor send the gift straight to the title company the day before closing, or the day of closing, instead of into your bank account. You still need a signed gift letter that says the money does not have to be paid back. The title company’s receipt at closing covers the transfer. If the money does go into your account, get statements that show it leave their account and land in yours. If that person will also be on the title, say so. That is a different file.