Can I Use Gift Money for My Downpayment?

Gift Money for DownpaymentFirst time home buyers usually work hard to save up enough money for their downpayment.  It takes a focused, serious effort to put away 20% for a downpayment and we say “Congratulations” if you’ve done just that.  But some of our home buyers are realizing the low interest mortgages are just too tempting to pass up even though they don’t quite have their downpayment saved in full.

Its not uncommon for them to ask us “Can my mom/dad/grandparents give me money so I can buy this house?”

And the answer is Yes – if you follow a few carefully documented steps.

When you accept a downpayment gift please don’t randomly deposit the money into any old bank account.  There is a 3-step process for accepting a cash downpayment gift and if you follow the steps exactly your mortgage underwriter should have little problem approving your loan.  This 3-step process is the same for all loan types – conventional, FHA, VA or other.

Step 1:  Write a gift letter

A gift letter is short, sweet and includes the following:

  • the amount of the gift
  • the address of the home being purchased
  • the relationship between the home buyer and the person giving the money
  • a statement that the money is a gift and not a loan
  • hand signed and dated by all parties

Step 2:  Write a gift check

The lender will be looking for a clear paper trail of  where the gift money came from. Before the giver writes the gift check be sure there is a bank statement showing the money is in their account.  Then write the gift check for the exact amount stated in the gift letter – to the penny.  Photo copy the check with one copy for the giver and one for the house buyer.  The lender will need all of this as documentation for the mortgage process.  Clean and simple makes for happy lenders.

Step 3:  Deposit the gift check

Once you get the gift check physically deposit it into your bank account and get a receipt – please do not deposit the check online with your smart phone.  We’re trying to keep things simple for your lender, remember?

Do not co-mingle the gift check with any other money like a paycheck, birthday gift, etc.  This will only confuse the lender.  The dollar amount on your deposit slip and deposit receipt must match the amount stated in the gift letter exactly – to the penny. Your mantra is clean and simple.

Also make sure to deposit the gift money into the same account which all of your money at closing will be drawn.  Multiple withdrawals from multiple savings accounts can give some lenders a headache.

Bonus Step 4:  If you are getting more than one cash gift for your downpayment make sure to follow these steps exactly for each gift.

Now you are ready to do some online searching with the most up-to-date MLS information available.




I am a Boulder County real estate specialist. Over the past three years, I have earned the distinction of being named a 5280 Five Star Realtor. This puts me in the top 7% of all Realtors in the Denver Metro Area for customer satisfaction. If you would like to schedule a buyer or seller meeting with me, please feel free to call me at 303-579-1617 or contact me by email.

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