Can family help with my down payment, and how do gift funds work?

Who can give me money for a down payment?

Family is always allowed: parents, grandparents, siblings, children, and relatives by marriage. Depending on the loan, a fiancé or domestic partner, a close friend with a documented relationship (FHA), or an employer may also qualify. The giver can't be anyone with a stake in the sale, like the seller or a real estate agent.

What paperwork do I need?

• A gift letter signed by the giver: the amount, their relationship to you, and a statement that it's a gift you don't have to pay back
• Proof of the transfer: a bank record showing the money leaving their account and landing in yours (or going straight to escrow)
• Sometimes proof the giver had the money, like their bank statement

Tip: talk to us before the money moves. Cash deposits and unexplained transfers are hard to document later.

Can a gift cover my whole down payment?

Often, yes. On FHA and VA loans, and on conventional loans for a primary home, the gift can usually cover the entire down payment. Some conventional loans with less than 20% down on multi-unit homes require some of your own money too.

What is a gift of equity?

If you're buying from a family member, they can sell you the home for less than it's worth, and the difference, the "gift of equity," can count as your down payment. For example, a parent sells you a $500,000 home for $450,000: the $50,000 of equity is your 10% down payment.

Does the giver owe gift tax?

Usually not. Most gifts only require the giver to file a gift tax return above the yearly exclusion amount, and actual tax is rare. Your family should confirm with their tax advisor.

Example scenario (illustrative)

A first-time buyer in San Antonio has $8,000 saved and needs about $20,000 for a 3% down payment and closing costs. Their parents give $15,000, wire it straight to escrow, and sign a gift letter. The loan closes with no problems because the paper trail was set up before the money moved.

Our take

Family help is one of the most common ways first-time buyers get in the door, and there's nothing to be embarrassed about. The only mistake is moving money without a plan. Call us first, and we'll tell your family exactly how and when to send it.