As of 2022, you could give up to $16,000 to any one person without incurring the gift tax. The IRS imposes a gift tax on certain monetary gifts and this tax is paid by the person donating the money, rather than the one who receives it. If you’ve had a down payment gift sitting in your account for that entire time period, you may not have to jump through extra hoops to document it. When you apply for a mortgage, most lenders look at your bank statements from the previous two to three months. While there’s no set time frame on when you can accept a down payment gift, it’s always better to do it sooner rather than later. For instance, you might be required to show copies of the donor’s bank statements to prove that they’re actually in a position to make a gift or a copy of a deposit slip showing when you put the money into your account. Specifically, you’ll have to produce a letter which includes the name of the donor, their relationship to you, the date and amount of the gift and a statement that says the money is given with no expectation of repayment.īoth of you will need to sign the letter and the lender may also require additional documents to back it up. Lenders require you to provide some detailed documentation any time a down payment gift is changing hands. Regardless of whether you’re getting a conventional, FHA or VA loan, a down payment gift is only acceptable when the house you’re purchasing will be your primary residence or second home. In that scenario, you’d be responsible for paying at least 3.5% of the down payment yourself. If you’re taking out an FHA or VA loan, the entire down payment can be gifted unless your credit score is below the minimum threshold of 580. However, some of it will probably have to come out of your own pocket, with the final split varying based on your loan type. If you’re putting down less than that, part of the money can be a gift. If you’re taking out a standard conventional loan, all of your down payment can be gifted if you’re putting down 20% or more.
How much money you’re eligible to receive as a down payment gift depends on the type of mortgage you’re borrowing. It also indicates to lenders that you and your family actually have enough money to afford the loan. The reason banks prefer these sources for a down payment gift is because they are more provable than, say, a stranger on the street who gave you money.
It’s also generally acceptable to receive gifts from your spouse, domestic partner or significant other if you’re engaged to be married. The money usually must come from a family member, such as a parent, grandparent or sibling.
Lenders generally won’t allow you to use a cash gift from just anyone to get a mortgage.
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