Gift Funds for a Down Payment: Rules and Gift Letter

Who can give: Fannie Mae and FHA compared

Each loan program has its own donor list. The table summarizes the two published rulebooks reviewed here.

Fannie Mae allows a gift from the seller only if the seller is also an acceptable donor and not tied to another interested party. Under FHA rules, “Only Family Members may provide equity credit as a Gift on Property being sold to other Family Members.”

For program basics, see conventional loans and FHA loans.

How much of the down payment can be a gift

Fannie Mae. The Selling Guide sets a minimum contribution from the borrower’s own funds in some cases:

• LTV of 80% or less (one- to four-unit principal residence, or second home): no minimum. “All funds needed to complete the transaction can come from a gift.”
• LTV above 80%, one-unit principal residence: no minimum either.
• LTV above 80%, two- to four-unit principal residence or second home: the borrower “must make a 5% minimum borrower contribution from their own funds.”

A gift from a donor who has lived with the borrower for the last 12 months counts as the borrower’s own funds, if both will live in the new home.

FHA. The borrower must make a “Minimum Required Investment (MRI) of at least 3.5 percent of the Adjusted Value.” A gift can cover the MRI if it also meets FHA’s MRI source rules. For down payment basics, see down payment.

What the gift letter must say

Fannie Mae requires a letter signed by the donor that:

• states “the actual or the maximum dollar amount of the gift”;
• includes “the donor’s statement that no repayment is expected”;
• gives the donor’s name, address, telephone number and relationship to the borrower.

FHA requires a gift letter “signed and dated by the donor and Borrower” that includes:

• the donor’s name, address and telephone number;
• the donor’s relationship to the Borrower;
• the dollar amount of the Gift;
• “a statement that no repayment is required.”

Under FHA rules, both donor and borrower sign. Under Fannie Mae rules, the donor signs.

How lenders trace the money

Fannie Mae accepts, among other documents:

• a copy of the donor’s check and the borrower’s deposit slip;
• a copy of the donor’s withdrawal slip and the borrower’s deposit slip;
• proof of an electronic transfer to the borrower or the closing agent;
• a settlement statement showing receipt of the donor’s check.

If the money moves at closing, the donor must give it to the closing agent by “electronic transfer, certified check, a cashier’s check, or other official check.”

FHA requires, before settlement, proof such as the donor’s bank statement showing the withdrawal and the deposit into the borrower’s account. At settlement, it requires evidence of an electronic transfer, a bank certified check, a cashier’s check or another official bank check. The lender must be able to determine “that the gift funds were not provided by an unacceptable source.”

Gift funds can also help with closing costs under Fannie Mae rules. See closing costs explained.

Gift tax: what the donor should know

The IRS sets an annual exclusion per recipient. For 2026, it is $19,000. The IRS explains: “if you give each of your children $19,000 in 2026, the annual exclusion applies to each gift.” Each spouse is entitled to the exclusion, so the IRS lists a 2026 total of $38,000 per recipient from two spouses. Splitting a gift with a spouse requires filing Form 709.

The 2025 Form 709 instructions say that a donor who gave someone more than $19,000 in the year (other than a spouse) “must generally file Form 709.” Filing does not always mean tax is owed. For 2026, the basic exclusion amount is $15,000,000.

On who pays, the IRS states: “The donor is generally responsible for paying the gift tax.” Gifts to a spouse and payments of someone’s tuition or medical expenses are also excluded.