Most gift funds are easy. Your parents wire the money to the title company, you sign a gift letter, and title confirms they got it. That's about it. On most loans the donor doesn't need to send bank statements when the money goes straight to title.
The paperwork only gets heavier when the gift lands in your account first. That's the one to avoid if you can.
The easy way: wire it straight to title
This is how almost every gift works. The donor wires the money to the title company before closing. Title confirms they received it, and I use that as the proof. Add the signed gift letter and you're done.
Two things to line up. Get the wire instructions from the title company, and have the donor confirm them by calling a phone number they already trust. Wire fraud hits gift transfers too.
If the amount changes, tell me. A letter for $20,000 and a $35,000 wire don't match, and I'll need a new letter.
The gift letter
It's a short form the donor signs. It lists the amount, the donor's contact info and how they're related to you, and says no repayment is expected. I'll send you the lender's form.
One test comes first: does anyone expect to be paid back? If yes, it's a loan, and calling it a gift doesn't change that.
When the gift goes into your account first
This takes more paper. The lender needs to see the money leave the donor's account and land in yours, so you'll need the donor's transfer record and your deposit record. Sometimes the donor has to show a bank record, and that's where a parent who said yes to $40,000 can get nervous. Better to find out early than after you're under contract.
Keep the trail clean. Use a direct transfer from the donor to you. Never pull out cash and redeposit it, and don't run the money through a third relative. Either one breaks the trail or adds another transfer to document.
Who can give depends on the loan
Under Fannie Mae, gifts can come from relatives and certain close family type relationships, and in some cases a longtime mentor. Gifts from anyone with a stake in the sale, like the seller, builder or agent, are mostly off limits. There are exceptions, such as a family member selling you their home. A regular friend isn't automatically allowed.
Personal gifts also only work on a home you'll live in or a second home, not an investment property. FHA, VA, USDA and other programs have their own rules, so confirm the loan first.
If the money comes from a business and not a person, that's a different review. Ask me before you assume it counts.
You may still need some of your own money
On a one unit home you'll live in, Fannie Mae doesn't require any of your own funds when the gift is standard. On two to four units, and on second homes over 80% LTV, the standard rule is 5% of the price from you. Some products have exceptions.
Example: you buy a $600,000 duplex with 10% down. That's $60,000. Five percent of the price, $30,000, has to be yours. A $60,000 gift from your parents alone doesn't meet it.
Now say you have $30,000 of your own and get a $45,000 gift. That covers the $60,000 down payment and $15,000 toward closing costs, as long as everything else checks out. A big balance in your account doesn't settle this. The lender looks at where each dollar came from.
Gifts for reserves, and gifts of equity
A cash gift can count toward reserves when the program allows it. But money already spent on your down payment can't count again as money left after closing. Add it up using the real amounts spent.
A gift of equity is different. A family member sells you the home for less than it's worth, and the difference counts toward your down payment. No cash lands in your account, so there's nothing to use as an emergency fund. Fannie Mae doesn't allow equity gifts to count for reserves.
If you're buying a family member's home, plan the contract, the value and the loan together. Don't use a cash gift form for that.
Gift tax is a separate issue
The mortgage doesn't decide whether the donor owes a gift tax filing. That depends on the amount, the year and their situation. Have their tax advisor check it. I'm not a tax pro.
Quick answers
Who can give me a gift for a down payment?
Usually a relative, fiance or domestic partner. Some programs also allow an employer or close friend.
Do I need to put in any of my own money?
On many loans, no. Some conventional loans on multi unit homes have minimum contribution rules.
Does the gift have to be deposited before I apply?
No. Most gifts are wired straight to the title company before closing.