How to Write a Gift Letter for a Mortgage Down Payment

A valid mortgage gift letter must include: (1) donor's full name, address, and phone number; (2) recipient's name (the borrower) and the relationship to the donor; (3) the property address being purchased; (4) the exact gift amount in US dollars; (5) an explicit statement that the funds are a gift and no repayment is expected or required; (6) the source of the gift funds; (7) the date of transfer; (8) donor's handwritten or electronic signature and date. Lenders use Fannie Mae's standard gift letter format or their own equivalent form — ask your loan officer for their preferred template. An unsigned, undated, or vague letter ("helping with down payment") will be rejected. Use clear, direct language: "I am gifting $20,000 to [borrower name] for the purchase of [address]. This is a gift, not a loan, and no repayment is required or expected." The Fannie Mae gift funds guidelines include the required letter format.

It depends on the loan type: (1) Conventional (Fannie Mae/Freddie Mac): gifts are restricted to relatives as defined by Fannie Mae — family members by blood, marriage, adoption, or legal guardianship. A close friend who is not a relative does not meet the definition for conventional loans; (2) FHA: more permissive — gifts are allowed from relatives, close friends with a clearly defined and documented interest in the borrower's wellbeing, employers, labor unions, and charitable organizations; (3) VA: any person may give a gift; (4) USDA: relatives only. Practical tip: if the donor is a friend but qualifies as a "domestic partner" or can document a close personal relationship, FHA may be more accommodating than conventional. If you're using conventional financing and need a friend's funds, consider having the gift pass through a family member — but be careful, this could be considered fraud if it misrepresents the source. See the gift letter glossary entry.

No — but later deposits create more documentation work. Best practice: deposit the gift at least 60 days before your loan application (seasoned funds require less documentation). If the gift arrives within 60 days of application, your lender will require a complete gift paper trail: donor bank statement showing the withdrawal, wire confirmation or cancelled check, and your bank statement showing the deposit. If the gift is wired directly to the title company at closing (a common approach), lenders may not require it to appear in your bank statements — check with your loan officer. Never deposit a large gift without a plan — an unexplained large deposit triggers underwriting scrutiny and delays. Notify your loan officer before the gift is transferred so they can tell you the cleanest documentation path.

Yes — for most loan types, gift funds can be used for both the down payment and closing costs. FHA: gift funds can cover 100% of the minimum down payment (3.5%) and all closing costs. VA: gift funds can cover closing costs and any funding fee. Conventional: gift funds can cover the down payment (subject to loan type rules) and closing costs. One practical note: lenders verify the source of all funds used in a transaction — gift funds used for closing costs are subject to the same gift letter and documentation requirements as gift funds for the down payment. If a relative is paying some closing costs directly to the title company (rather than gifting money to you), the documentation approach differs — confirm with your loan officer. See closing costs guide for a breakdown of what closing costs include.

In Canada, gift funds for mortgage down payments are accepted by most lenders, but the rules differ slightly from the US: (1) For CMHC-insured mortgages (less than 20% down): the down payment must come from the borrower's own resources — gifts are generally not accepted for the down payment on insured purchases unless from an immediate family member (parent, sibling, grandparent). CMHC requires a gift letter and 90-day bank history for the donor; (2) For conventional (uninsured) mortgages (20%+ down): most lenders accept gift funds from family members with a gift letter; (3) Sagen and Canada Guaranty (other mortgage default insurers) have similar requirements to CMHC; (4) A gift from a non-family member is generally treated as a loan by Canadian lenders — it would be counted as a liability in the TDS ratio unless the borrower can prove it is truly non-repayable. The CMHC down payment rules confirm the family gift requirement.

If the gift is actually a loan disguised as a gift — meaning the borrower intends to repay it but the gift letter says no repayment is required — this constitutes mortgage fraud. Consequences: loan origination fraud is a federal crime under 18 U.S.C. § 1014; the lender can demand immediate repayment of the mortgage; both the borrower and the "donor" could face criminal charges. Lenders watch for signs a gift is actually a loan: large gift from a non-family member; donor is also a party to the transaction (seller, real estate agent); pattern of funds moving back to the donor after closing. If you genuinely intend to repay a family member, the honest approach is to disclose it as a personal loan — the lender will then count it as a liability in your DTI calculation. If it doesn't fit as a loan, structure it correctly as a true gift. See mortgage fraud prevention 2027 for fraud types and consequences.