Per-Program Gift Fund Rules

Gift Letter Requirements

The gift letter is the linchpin document. It is short, but every element matters because lenders compare it to the actual paper trail. A standard letter includes:

• Donor's full name, relationship to the borrower, and address.
• Borrower's full name.
• Property address of the home being purchased.
• Exact dollar amount of the gift.
• A clear statement that the funds are a gift, not a loan, with no expectation of repayment.
• Donor's signature and date.

Documenting the Gift (Sourcing)

"Sourcing the gift" means proving where the money came from. Lenders are required to do this under federal anti-money-laundering rules. Typical package:

• Donor's most recent bank statement showing the funds before transfer.
• Wire receipt or canceled check showing the transfer to the borrower.
• Borrower's bank statement showing the funds received.
• If the gift is large relative to the donor's documented income, some lenders ask for the donor's most recent tax return.

If the gift has been in the borrower's account for two months or longer and shows on two consecutive bank statements, many lenders treat it as "seasoned" and waive the donor sourcing step. Funding the gift early is the cleanest path.

Gift Tax Considerations

• -2026 annual exclusion: $19,000 per donor per donee. A married couple can give $38,000 jointly to one donee per year without any gift tax filing.
• -Above the annual exclusion. The donor files IRS Form 709 reporting the gift. Form 709 reduces the donor's lifetime exclusion ($13.99M in 2026), it does not trigger current tax until the lifetime exclusion has been consumed.
• -Donee tax. The recipient does not pay income tax on a gift received.
• -Larger family transfers. For gifts in the hundreds of thousands, talk to an estate planning attorney about structures like 529 plans, trust gifts, and intra-family loans at the AFR rate. Not tax or legal advice. Consult your own CPA and attorney.

Timing

Lenders prefer to see gift funds in the borrower's account at least two months before closing, fully visible on two months of statements. This removes the need to source the donor separately. If the gift is transferred later, the lender will require the full donor documentation package and the wire / check paper trail.

Earlier is always cleaner. If you know your parent is gifting the down payment, get the funds transferred the day you start house hunting.

Common Mistakes

• -Calling a loan a gift. Signing a gift letter when the family expects repayment is mortgage fraud. The undisclosed debt also throws off the borrower's DTI math. Structure the help honestly or look at a documented intra-family loan.
• -Cash with no paper trail. A gift received as physical cash cannot be documented and is not usable for a mortgage down payment. Deposit and wire from named accounts only.
• -Unsourced donor. If the donor cannot show the funds existed before the transfer, the lender cannot use the money. Donors should pull a clean account statement before sending.
• -Wrong donor type. Each program has its own list of eligible donors. Run the donor relationship by the lender before transferring funds.

Combining Strategies

Gift funds stack with other family-help structures. A parent can gift the down payment AND co-sign as a non-occupant co-borrower on the same loan. A parent can gift the down payment AND title the property in a Family Opportunity Mortgage. Each piece is documented separately, but they can run in parallel.