Gifted down payment

Definition

Money received from a relative, most often a parent, to fund all or part of the down payment. The lender accepts it on three conditions: the relationship with the donor is eligible under its program, the gift is not repayable, and the money is traceable. In practice, you need a signed gift letter naming the donor, the amount, and the fact that no repayment is expected, then proof of the transfer into your account. Example: your parents give you $40,000 on April 10. The lender will want the letter, your account statement showing the April 10 deposit, and sometimes the donor’s statement proving the money existed beforehand. A gift that arrives the day before closing, with no letter, slows or blocks the file. On an insured loan the gift must come from an immediate family member; a gift from a friend or a “family loan” is treated differently.