Saving for a down payment is often the biggest challenge buyers face. With rent, rising prices, and daily expenses, it can feel impossible. For many, a financial gift from family makes homeownership possible.

Around the holidays, some families choose to turn part of their gift-giving into something bigger, like helping with a down payment. But gift funds can be used at any time of year, and lenders work with them regularly. The key is knowing the rules and getting the details right from the start.

What Are Gift Funds?

Gift funds are money someone gives you to help purchase a home, with no expectation of being paid back.

Depending on your loan, gift funds may go toward your down payment, closing costs, and sometimes required reserves.

Gift funds cannot be treated as a secret loan. If there is an agreement to repay the money later, it may cause problems with your mortgage approval and could even violate the rules of the loan.

Who Can Give a Down Payment Gift?

Different loan programs have their own rules, but in general, acceptable donors are usually immediate family, which often includes:

• Parents or step-parents
• Grandparents
• Siblings and children
• Spouses and domestic partners
• In many cases, a fiancé or longer-term romantic partner

Gift funds cannot come from anyone who benefits from the sale, such as:

• The seller
• Your real estate agent
• The builder or developer
• Anyone else who might be paid a commission on the transaction

Gift funds are generally for primary residences and sometimes second homes but are usually not allowed on investment properties. Your lender will look at who gave the money and how you are related, so be upfront about it early in the process.

How to Document Gift Funds the Right Way

Lenders are required to verify the source of your down payment and confirm that gift money is, in fact, a gift. That means a clear paper trail is a necessity.

Here’s what that usually involves:

Talk to Your Lender First

Before anyone writes a check or sends a wire, have a conversation with your loan officer. They will be able to tell you what your loan program requires, so you don’t have to guess.

Get a Gift Letter Signed

Most lenders require a signed gift letter with the following information:

• Donor’s name and contact information
• Their relationship with you
• The exact amount of the gift
• A statement that the funds are a gift and do not need to be repaid

Your lender will likely provide a simple template to make it easy.

Show Proof of the Donor’s Funds

In some cases, the donor may be asked to provide a recent bank statement or similar document to prove they had the funds available before the gift. This helps the lender verify that the money is legitimate and was not borrowed elsewhere.

Show Proof of the Transfer

You’ll also need to document how the money was deposited into your account. This can include:

• A copy of the cashier’s check or wire confirmation
• The donor’s bank statement showing the withdrawal
• Your bank statement showing the deposit

It’s important to avoid large, unexplained cash deposits. Without clear documentation, it’s one of the most common reasons gift funds create delays.

How the Sharpe Mortgage Team Can Help

Using gift funds doesn’t need to be complicated. With the right guidance, it can be just another step in your homebuying plan.

If you’re thinking about using a financial gift for your down payment, don’t hesitate to reach out.

Our team can:

• Explain how gift funds work for your loan type
• Provide the right gift letter and documentation checklist
• Help you and your family members feel comfortable with each step

Ready to talk through your options? Contact The Sharpe Mortgage Team at (336) 575-9448 to get started with a personalized plan.