Can I Use Gift Funds for a Down Payment on a Conventional Loan?
Having family help with your down payment is allowed on conventional loans — but the rules depend on who is giving the gift and what type of property you are buying. Here is what you need to know.
Gift funds for a primary residence
On a one-unit primary residence, Fannie Mae guidelines allow the entire down payment and closing costs to come from gift funds from an immediate family member. You are not required to contribute any of your own money when the LTV is at or below 80%, or when meeting other eligible program requirements. For primary residences with 2–4 units, at least 5% of the down payment must come from the borrower’s own funds.
Gift funds for a second home
Gift funds are permitted for second home purchases, but the borrower must contribute at least 5% of the down payment from their own funds. The remaining amount can be gifted.
Gift funds for investment properties
Gift funds are not permitted for investment property purchases. All down payment and closing cost funds must come from the borrower’s own eligible assets.
Who can give a gift?
Acceptable gift donors include: spouse, child, parent, grandparent, sibling, aunt or uncle, domestic partner, and fiancé/fiancée. In some cases employer assistance programs and approved nonprofits may also provide gift-like assistance. The gift must be a true gift — it cannot be a loan requiring repayment.
How are gift funds documented?
The lender requires a signed gift letter from the donor confirming the amount, the relationship to the borrower, and a statement that no repayment is expected. Bank statements showing the transfer of funds may also be required. Lenders will verify that funds have been received and are available for closing.
Gift of equity
Fannie Mae also allows a gift of equity when a family member sells you a property below market value — the difference counts as a gift toward the down payment. Gifts of equity are permitted for owner-occupied and second home purchases. They are not permitted for investment properties.
Key takeaways
- One-unit primary residence: entire down payment can come from family gift funds.
- 2–4 unit primary or second home: borrower must contribute at least 5% from own funds.
- Investment properties: gift funds are not permitted.
- Gifts must be true gifts from eligible donors — documented as non-repayable.
- Gift of equity allowed on primary residences and second homes; not on investment properties.
- Large unexplained deposits are flagged — document gift fund transfers well in advance.
Ready to explore your conventional loan options? Lendia can walk you through what you qualify for and find the right program for your goals.