A gift letter for a mortgage is a signed statement from the person giving you money that says how much they're giving, that you don't have to pay it back, and who they are. Fannie Mae requires the donor's name, address, phone number, relationship to you, the dollar amount, and a no-repayment statement. FHA requires the same items, and both the donor and the borrower sign and date it. Your lender will also need proof the money moved from the donor to you or to closing.
I'm Taylor Ring, a Mortgage Loan Officer with Fairway Independent Mortgage Corporation (The Wood Group) in Belton. If a parent or grandparent is helping with your down payment on a home in Temple, Killeen, or Georgetown, the gift is the easy part. The paperwork takes more care. This guide walks through the conventional (Fannie Mae) and FHA rules so the gift doesn't slow down your closing.
Getting help with your down payment? Get Pre-Approved or Book a Free Consultation.
What a Mortgage Gift Letter Must Include
| Item | Fannie Mae (conventional) | FHA (HUD) |
|---|---|---|
| Who signs | The donor | The donor and the borrower, both dated |
| Dollar amount | Actual amount, or the maximum amount | The dollar amount of the gift |
| No repayment | Donor states no repayment is expected | Statement that no repayment is required |
| Donor's name, address, phone | Required | Required |
| Donor's relationship to you | Required | Required |
| Gift from a trust or estate | Letter lists the name of the trust or estate account | Not addressed in the same section |
Sources: Fannie Mae Selling Guide B3-4.3-04 and HUD Handbook 4000.1, Gifts (Personal and Equity).
Why the amount matters: Fannie Mae notes that if the gift you actually receive is different from the amount used when the loan was run through its automated underwriting system (DU), the lender may need to resubmit the file. Tell me early if the number changes.
Who Can Give You Gift Money?
Conventional Loans (Fannie Mae)
Fannie Mae allows gifts from:
- A relative: your spouse, child, or other dependent, or anyone related to you by blood, marriage, adoption, or legal guardianship.
- A non-relative with a family-type relationship: a domestic partner (or their relative), your fiance or fiancee, a former relative, or someone with a long-standing familial-like or mentorship relationship with you.
The donor can't be, or be affiliated with, the builder, developer, real estate agent, or any other interested party to the sale. A seller who is also an acceptable donor (a parent selling to a child, for example) can give a gift if they aren't affiliated with another interested party.
FHA Loans (HUD)
HUD allows gifts from:
- Your family member
- Your employer or labor union
- A close friend with a clearly defined and documented interest in you
- A charitable organization
- A governmental agency or public entity with a homeownership assistance program for low- or moderate-income families or first-time buyers
One FHA rule catches people: cash on hand is not an acceptable source of donor gift funds. The money needs a paper trail from the donor's account.
What Gift Money Can Pay For
Under Fannie Mae's rules, a gift can cover all or part of the down payment, closing costs, or financial reserves on a principal residence or second home. Gifts aren't allowed on an investment property.
Fannie Mae's minimum borrower contribution rules:
| Loan-to-value | Property | Your own funds required? |
|---|---|---|
| 80% or less | One- to four-unit principal residence, or second home | No. All funds can come from a gift. |
| Over 80% | One-unit principal residence | No. All funds can come from a gift. |
| Over 80% | Two- to four-unit principal residence, or second home | Yes. 5% from your own funds, then gifts can add to it. |
Fannie Mae also says a gift from a donor who has lived with you for the last 12 months counts as your own funds toward that minimum, if you'll both live in the home. That takes a donor certification and documents showing the shared address.
On FHA loans, HUD lets a gift go toward your minimum required investment (the down payment), but a gift used that way must also meet HUD's source rules for that investment, so I'll check the gift against those rules before we count it. For the rest of the FHA picture, see my FHA loan requirements in Texas guide.
How to Document the Transfer
The letter is only half of it. Your lender has to see the gift funds move.
Fannie Mae accepts any of these:
- A copy of the donor's check and your deposit slip
- A copy of the donor's withdrawal slip and your deposit slip
- Evidence of an electronic transfer from the donor's account to yours or to the closing agent
- A copy of the donor's check to the closing agent
- A settlement statement showing receipt of the donor's check
If the gift goes straight to closing, Fannie Mae requires proof the donor gave the closing agent the funds by electronic transfer, certified check, cashier's check, or other official check.
HUD (FHA) accepts:
- Before closing: the donor's bank statement showing the withdrawal plus evidence of the deposit into your account; a canceled check plus evidence of deposit; a withdrawal receipt plus evidence of deposit; or evidence of an electronic transfer.
- At closing: evidence of an electronic transfer from the donor's account, a bank certified check, a cashier's check, or other official bank check paid to the settlement agent.
HUD also requires the lender to make a reasonable determination that the gift didn't come from an unacceptable source.
Large Deposits Get a Second Look
Fannie Mae defines a large deposit as a single deposit of more than 50% of your total monthly qualifying income. If you need that money for the purchase, the lender has to document where it came from. Fannie Mae even lists a copy of a wedding invitation as an example of supporting a gift received.
Hypothetical example: Your qualifying income is $6,000 a month, so any single deposit over $3,000 counts as large. Your parents deposit $15,000 toward your down payment. With a signed gift letter and the transfer record, it's documented. Without them, Fannie Mae's rules have the lender subtract the unsourced amount from your verified funds. Hypothetical numbers for illustration only.
My advice: don't move gift money around between your own accounts before we've talked. Every hop is another statement to explain.
Gifts of Equity
A gift of equity is when the seller gives you part of their equity as a credit at closing, usually a family member selling you their home below market value.
- Fannie Mae: allowed on principal residence and second home purchases. It can cover all or part of the down payment and closing costs (including prepaids), but not reserves. The file needs a signed gift letter and the settlement statement showing the gift of equity.
- FHA: only family members may give equity credit as a gift on a home sold to another family member, with a gift letter signed and dated by the donor and borrower.
Sample Gift Letter Format
Most lenders have their own form, and I'll give you mine. This sample shows the pieces Fannie Mae and HUD look for so you know what to gather. Sample format only, not a legal document; use your lender's form when you have it.
Gift Letter
I/We, [donor name(s)], of [donor street address, city, state, ZIP], phone [donor phone], am/are giving a gift of $[amount] to [borrower name(s)], my/our [relationship], to be applied toward the purchase of the property at [property address or "a home to be purchased"].
This is a gift. No repayment is expected or required.
The funds are coming from [donor bank or account name] and will be transferred [to the borrower's account / to the closing agent] on or about [date].
Donor signature and date: ______________________
Borrower signature and date: ______________________
For an FHA loan, both signatures and dates are required. For a gift from a trust or estate on a conventional loan, the letter also names the trust or estate account.
Gift Money vs. Down Payment Assistance
A gift from a person is different from a grant or assistance program. Fannie Mae covers grants from entities in a separate section of its guide, and programs like those from TDHCA and TSAHC have their own rules. Fairway is a participating lender for both. If you're combining family help with a program, see my down payment assistance in Texas page and plan your closing costs in Texas around both.
Common Gift Letter Mistakes
- Amount mismatch. The letter says one number and the deposit shows another.
- Missing signature or date. On FHA, both the donor and borrower sign and date.
- Cash. A donor who hands over cash creates a sourcing problem, and FHA doesn't accept cash on hand from a donor.
- The wrong donor. On conventional loans, a gift tied to the agent, builder, or another interested party isn't allowed.
- "We'll pay it back later." A gift letter says no repayment. If there's really a loan behind it, tell me, because that changes the file. A mortgage preapproval is the right time to sort this out, before underwriting.
Tax questions about giving or receiving a large gift belong with a tax professional.
Frequently Asked Questions
What is a gift letter for a mortgage?
A gift letter is a signed statement from the person giving you money for your home purchase. It states the dollar amount, says no repayment is expected or required, and lists the donor's name, address, phone number, and relationship to you. Lenders use it with transfer records to show the money is a true gift.
Who can give gift money for a conventional loan?
Fannie Mae allows gifts from relatives, including a spouse, child, or anyone related by blood, marriage, adoption, or legal guardianship, and from certain non-relatives such as a domestic partner, fiance, former relative, or long-time mentor. The donor cannot be the builder, developer, real estate agent, or another interested party.
Does an FHA gift letter need to be signed by the borrower?
Yes. HUD requires a gift letter signed and dated by both the donor and the borrower. It must include the donor's name, address, telephone number, relationship to the borrower, the dollar amount of the gift, and a statement that no repayment is required.
Can gift money pay for closing costs?
Yes, under Fannie Mae's rules a gift can pay for all or part of the down payment, closing costs, or financial reserves on a principal residence or second home. Gifts are not allowed on investment properties, and some two- to four-unit and second home loans require a 5 percent contribution from your own funds first.
How do I prove the gift money was transferred?
Your lender needs records showing the money moved from the donor. Acceptable proof includes the donor's check with your deposit slip, a withdrawal slip with your deposit slip, an electronic transfer record, or an official check or wire to the closing agent. FHA does not accept cash on hand as a donor source.
Ready to Plan Your Down Payment?
I'll tell you exactly what your donor needs to sign and send, and when, so the gift is documented before underwriting asks.
Get Pre-Approved | Book a Free Consultation
Related Guides
- FHA Loan Requirements in Texas
- Conventional 97 Loan
- Down Payment Assistance in Texas
- Mortgage Preapproval in Texas
- The Mortgage Underwriting Process
- Closing Costs in Texas
Sources
- Fannie Mae Selling Guide: B3-4.3-04, Personal Gifts, B3-4.3-05, Gifts of Equity, B3-4.2-02, Depository Accounts, and B3-4.3-06, Grants and Lender Contributions
- U.S. Department of Housing and Urban Development: Single Family Housing Policy Handbook 4000.1, Gifts (Personal and Equity)
Taylor Ring, NMLS #2809683 | Fairway Independent Mortgage Corporation, NMLS #2289 | The Wood Group of Fairway, 127 Lake Rd Ste 300, Belton, TX 76513 | Equal Housing Opportunity. This is not a commitment to lend. All loans are subject to credit approval and program guidelines, and approval, rates, and program availability are not guaranteed. Gift eligibility and documentation depend on the loan program and the lender's review. This article is general information, not legal, tax, or financial advice.