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Your parents are giving you $25,000 for the down payment. The lender wants a gift letter, the donor’s bank statement, and proof of the transfer. Most gift funds are allowed, but the documentation must be specific.

A gift fund is money from a family member or close relative used for the down payment, closing costs, or reserves on a mortgage loan. Most loan programs (FHA, VA, conventional) allow gift funds from immediate family, relatives, or close friends with documentation. The 3 main requirements: a signed gift letter stating the amount, giver, relationship, and that no repayment is required; the giver’s bank statement showing the transfer; the giver’s ID. The gift must be in the borrower’s account before closing, and it must be “seasoned” (in the account for 60+ days) or fully documented at the time of the transfer.

Gift funds are money from family or close relatives used for down payment or closing costs. Requires a gift letter, donor’s bank statement, donor’s ID, and proof of transfer. Allowed by FHA, VA, conventional. Not allowed by some portfolio lenders.

For the broader bank statement workflow, see the bank statement converter. For asset verification, see the asset verification guide. For the mortgage source of funds, see the mortgage source of funds.

What most gift fund guides miss is that the documentation requirement is not a one-time event. The lender requires the gift letter at application, the donor’s bank statement at underwriting, and the proof of transfer at closing. Each step has its own documentation. Most borrowers prepare only the gift letter and are surprised when the underwriter asks for more. The fix: prepare all 3 documents upfront, and check the lender’s specific requirements (some require a 60-day seasoning, some require a notarized letter, some require the donor’s 2 months of bank statements).

What Is a Gift Fund for Mortgage?

A gift fund is money from a family member or close relative used for the down payment, closing costs, or reserves on a mortgage loan. The money is given without expectation of repayment, and the giver does not have any ownership interest in the property.

The 3 main requirements for gift funds:

1. The giver must be a qualifying donor. Most loan programs allow gifts from immediate family (parents, siblings, grandparents, children, spouse) and close relatives (aunts, uncles, cousins, in-laws). Some programs also allow gifts from close friends, employers, or charitable organizations. The donor cannot be someone with a financial interest in the transaction (realtor, builder, seller).

2. The borrower must contribute a minimum amount. Most loan programs require the borrower to contribute at least 5% of the purchase price from their own funds. Gift funds can cover the remaining down payment. For an FHA loan, the minimum contribution is 3.5% from the borrower’s own funds; the rest can be a gift. For conventional loans, the minimum contribution is typically 5% from the borrower’s own funds.

3. The documentation must be specific. The gift letter, donor’s bank statement, donor’s ID, and proof of transfer are all required. The gift letter must be signed by the donor, state the amount, the donor’s name and address, the relationship to the borrower, and explicitly state that no repayment is required. The donor’s bank statement must show the gift amount in the donor’s account before the transfer. The proof of transfer is the wire or check receipt.

Who Can Give Gift Funds (Allowed Donors)

3 categories of allowed donors, by loan program:

FHA. Gifts are allowed from family members (parents, siblings, grandparents, children, spouse, domestic partner), close relatives (aunts, uncles, cousins, in-laws), and the borrower’s employer or labor union. Gifts from close friends are not allowed. Charitable organizations are allowed for down payment assistance programs.

VA. Gifts are allowed from family members and close relatives. The VA also allows gifts from the seller’s family (in some cases) and from government agencies (for down payment assistance).

Conventional (Fannie Mae, Freddie Mac). Gifts are allowed from family members, close relatives, the borrower’s employer, a charitable organization, or a close friend with a documented relationship to the borrower. The donor cannot be someone with a financial interest in the transaction.

Portfolio lenders. Some portfolio lenders (banks that hold loans in-house) have stricter rules. Some require the donor to be a family member, no friends or employers. The fix: check the lender’s specific policy before applying.

For the broader loan program comparison, see the FHA bank statement guidelines.

The 3 Required Documents

3 documents are required for every gift fund, regardless of loan program:

1. Gift letter. A signed letter from the donor stating: the amount of the gift, the donor’s name and address, the relationship to the borrower, the property address, and an explicit statement that no repayment is required. The letter should be signed and dated. The lender typically provides a template, but the borrower can also draft one.

2. Donor’s bank statement. A recent bank statement (typically within 30 days) showing the donor’s account with the gift amount available. The statement confirms the donor has the funds and the gift is not a loan from a third party. The statement can be a savings, checking, or investment account statement.

3. Proof of transfer. A wire receipt, check image, or transfer confirmation showing the gift was transferred from the donor’s account to the borrower’s account. The transfer must be completed before closing. Some lenders accept partial documentation if the transfer is pending but imminent.

Additional documents that may be required:

4. Donor’s ID. A copy of the donor’s driver’s license or passport, used to verify the donor’s identity and the relationship to the borrower.

5. Source of donor’s funds (for large gifts). For gifts over $25,000-$50,000, the lender may require documentation of the donor’s source of funds. The source can be savings, sale of an asset, or another gift. The donor’s tax returns may be required.

For the asset verification rules, see the asset verification guide.

The Gift Letter Template (8 Required Elements)

8 elements that every gift letter must contain:

1. Date. The date the letter is signed. The letter should be recent (within 30 days of application).

2. Donor name and address. The donor’s full legal name and current address. The donor’s ID should match the letter.

3. Borrower name. The borrower’s full legal name (must match the loan application).

4. Relationship. The relationship between the donor and the borrower (e.g., “mother,” “father,” “aunt”). The relationship must be a qualifying relationship per the loan program.

5. Property address. The address of the property being purchased. The gift must be for the specific property, not a general gift.

6. Gift amount. The dollar amount of the gift. If the gift is a percentage of the down payment, state the amount in dollars.

7. No repayment statement. Explicit statement: “This gift is not a loan and does not require repayment. I have no financial interest in the property.”

8. Signature. The donor’s signature and printed name. The signature should be original (not electronic) for most lenders.

The lender typically provides a template, but the borrower can also draft one. The letter should be on plain paper (no letterhead required). The donor signs in front of a notary if required by the lender.

The 60-Day Seasoning Rule

The seasoning rule: if the gift has been in the borrower’s account for 60+ days, the lender treats it as the borrower’s own funds and may not require the gift letter. The seasoning requirement applies to large deposits in general, not just gift funds.

3 scenarios where seasoning matters:

Scenario 1: Gift in account for 60+ days. The gift was transferred to the borrower’s account 60+ days before application. The lender treats it as the borrower’s own funds. The gift letter is not required (though the lender may still request it).

Scenario 2: Gift in account for less than 60 days. The gift was transferred recently. The lender requires the gift letter, donor’s bank statement, donor’s ID, and proof of transfer. The gift is “documented” rather than “seasoned.”

Scenario 3: Gift expected but not yet received. The borrower expects a gift but has not received it yet. The lender cannot count the gift as a source of funds until it is received. The fix: close on the gift before the loan closes, or use alternative funds.

The seasoning rule exists because lenders want to prevent fraud. A borrower who deposits a large amount shortly before applying may be hiding a loan, a side income, or a fraudulent source. The 60-day rule ensures the funds are “real” and not a recent transaction designed to inflate the down payment.

The 5 Common Gift Fund Mistakes

5 mistakes that consistently cause problems for borrowers using gift funds:

1. Using a non-qualifying donor. A gift from a friend, employer (in some cases), or charitable organization may not be allowed. The fix: check the lender’s donor list before relying on the gift.

2. Missing the gift letter at application. The lender requires the gift letter at application, not at underwriting. The fix: prepare the gift letter before applying, not after.

3. Insufficient donor documentation. A donor’s bank statement without the donor’s ID, or a gift letter without the donor’s signature, is incomplete. The fix: prepare all 3 documents (letter, statement, ID) upfront.

4. Gift not transferred before closing. The gift must be in the borrower’s account before closing. A gift that is transferred after closing is too late. The fix: arrange the transfer 1-2 weeks before closing.

5. Gift amount exceeds the documentation threshold. A gift of $50,000+ may require additional documentation of the donor’s source of funds. The fix: if the gift is large, ask the lender about the source-of-funds requirement upfront.

A common failure mode brokers report is the borrower receiving the gift after the loan has been submitted, requiring a re-submission of the loan with the new documentation. The fix: arrange the gift transfer 1-2 weeks before applying, not after.

Gift Funds by Loan Program

3 loan programs have different gift fund rules:

FHA (Federal Housing Administration). Gifts are allowed from family members, close relatives, the borrower’s employer, and charitable organizations. The minimum borrower contribution is 3.5% from the borrower’s own funds. The gift can cover the entire remaining down payment and closing costs. FHA does not require a minimum dollar amount for the gift.

VA (Veterans Affairs). Gifts are allowed from family members and close relatives. The VA also allows the seller to contribute up to 4% of the purchase price toward the borrower’s closing costs (seller concessions). The VA does not require a minimum borrower contribution for 100% financing loans.

Conventional (Fannie Mae, Freddie Mac). Gifts are allowed from family members, close relatives, the borrower’s employer, charitable organizations, and close friends with a documented relationship. The minimum borrower contribution is typically 5% from the borrower’s own funds. Some conventional loans allow 100% gift funds for first-time buyers with down payment assistance programs.

For the broader loan program comparison, see the FHA bank statement guidelines and the mortgage application bank statement guide.

The 3 Tools for Gift Fund Documentation

3 tools that simplify the gift fund documentation workflow:

1. Lender-provided gift letter template. Most lenders provide a gift letter template that the donor signs. The template ensures all 8 required elements are included. The borrower should request the template at application, not at underwriting.

2. Bank statement converter (for the donor’s statement). If the donor’s bank statement is in PDF format, a converter extracts the data and produces a clean file. The output is structured data that the lender can review quickly.

3. Notary. Some lenders require the gift letter to be notarized. The donor signs in front of a notary, who verifies the donor’s identity and the signature. The notarized letter is more credible than an un-notarized letter.

For the workflow that produces clean bank statement data for the donor’s statement, see the bank statement converter. The output is structured data with the gift amount, the donor’s account, and the transfer date.

The Memorable Line

Gift funds are family money that becomes your down payment. The letter is the promise. The bank statement is the proof. The transfer is the closing.

Related Pages

For the asset verification rules, see the asset verification guide. For the source of funds, see the mortgage source of funds. For the self-employed mortgage application, see the self-employed mortgage application guide. For the mortgage broker workflow, see the bank statement for mortgage brokers. For the broader mortgage application, see the mortgage application bank statement guide. For the DSCR loan, see the DSCR loan guide. For the bank statement glossary, see the bank statement glossary.

For the workflow that produces clean bank statement data for the donor’s statement and the borrower’s account, see the bank statement converter. The output is structured data with the gift amount, the donor’s account, the transfer date, and the resulting borrower balance.